Starwood 2003 Annual Report Download - page 43

(d) At December 31, 2003, CBA was 2.72%
(e) Included approximately $20 million and $37 million at December 31, 2003 of fair value adjustments related to the Ñxed-to-Öoating
interest rate swaps for the Sheraton Holding Public Debt and the Senior Notes, respectively.
Fiscal 2003 Developments. In May 2003, the Company sold an aggregate of $360 million 3.5% coupon
convertible senior notes due 2023. The notes are convertible, subject to certain conditions, into 7.2 million
Shares based on a conversion price of $50.00 per Share. Gross proceeds received were used to repay a portion
of the Company's Senior Credit Facility deÑned below and for other operational purposes. Holders may Ñrst
present their notes to the Company for repurchase in May 2006.
During the second quarter of 2003, the Company amended its Senior Credit Facility. The amendment
adjusted the leverage coverage ratio for the second quarter of 2003 and for the next eight quarters (through
June 30, 2005). In addition, the Company modiÑed its current covenant on encumbered EBITDA (as
deÑned) and added a restriction on the level of cash dividends. The Company currently expects to be in
compliance with the amended covenants for the remainder of the Senior Credit Facility term.
Fiscal 2002 Developments. In October 2002, the Company reÑnanced its previous senior credit facility
with a new four-year $1.3 billion senior credit facility. The new facility is comprised of a $1.0 billion revolving
facility and a $300 million term loan, each maturing in 2006, with a one-year extension option, and an initial
interest rate of LIBOR ° 1.625% (the ""Senior Credit Facility''). The proceeds from the new Senior Credit
Facility were used to pay oÅ all amounts owed under the Company's previous senior credit facility, which was
due to mature in February 2003. The Company incurred approximately $1 million in charges in connection
with this early extinguishment of debt.
In September 2002, the Company terminated certain Fair Value Swaps, resulting in a $78 million cash
payment to the Company. These proceeds were used to pay down the previous revolving credit facility and will
result in a decrease to interest expense on the hedged debt through its maturity in 2007. In order to retain its
Ñxed versus Öoating rate debt position, the Company immediately entered into Ñve new Fair Value Swaps on
the same underlying debt as the terminated swaps.
In April 2002, the Company sold $1.5 billion of senior notes in two tranches Ì $700 million principal
amount of 7
3
/ 8 % senior notes due 2007 and $800 million principal amount of 7
7
/ 8 % senior notes due 2012. The
Company used the proceeds to repay all of its senior secured notes facility and a portion of its previous senior
credit facility. In connection with the repayment of debt, the Company incurred charges of approximately
$29 million including approximately $23 million for the early termination of interest rate swap agreements
associated with repaid debt, and $6 million for the write-oÅ of deferred Ñnancing costs and termination fees
associated with the early extinguishment of debt.
Fiscal 2001 Developments. In December 2001, the Company entered into an 18-month 450 million
Euro loan. The loan had an interest rate of Euribor plus 195 basis points. The proceeds of the Euro loan were
drawn down in two tranches; the Ñrst 270 million Euros was drawn down in December 2001 and used to repay
the previously outstanding 270 million Euro facility and the remaining 180 million Euros was drawn down in
January 2002 and the proceeds were used to pay down a portion of the Company's previous senior credit
facility. A portion of the proceeds from the sale of the Principe and the Sardinia Assets were used to repay this
facility in its entirety in June 2003, as required by the terms of the debt agreement.
In May 2001, the Company sold an aggregate face amount of $816 million zero coupon convertible senior
notes due 2021. The two series of notes had an initial blended yield to maturity of 2.35%. The notes are
convertible, subject to certain conditions, into an aggregate 9,657,000 Shares. The Company received gross
proceeds from these sales of approximately $500 million, which were used to repay a portion of its senior
secured notes facility that bore interest at LIBOR plus 275 basis points. The Company incurred approximately
$9 million of charges in connection with this early debt extinguishment. In May 2002, the Company
repurchased all of the outstanding Series A Convertible Senior Notes for $202 million in cash. Holders of
Series B Convertible Senior Notes may Ñrst put these notes to the Company in May 2004 for a purchase price
of approximately $330 million. The Company has classiÑed this debt maturity as long-term as it has the intent
and ability to draw on its revolving credit facility for such funding, if required.
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