Starwood 2005 Annual Report Download - page 97

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
AND STARWOOD HOTELS & RESORTS
NOTES TO FINANCIAL STATEMENTS Ì (Continued)
On October 22, 2004, the President signed the American Jobs Creation Act of 2004 (the ""Act''). The
Act creates a temporary incentive for U.S. corporations to repatriate accumulated income earned abroad by
providing an 85 percent dividends received deduction for certain dividends from controlled foreign corpora-
tions. In order to repatriate funds in accordance with the Act, in October 2005 the Company increased several
existing bank credit lines available to its wholly owned subsidiary, Starwood Italia, from 129 million euros to
399 million euros, 350 million euros of which was borrowed at that time. These credit lines had interest rates
ranging from Euribor ° 0.50% to Euribor ° 0.85% and maturities ranging from April 1, 2006 to May 8, 2007.
These proceeds, along with approximately 100 million euros which Starwood Italia borrowed from the
Corporate Credit Line (total borrowings of 450 million euros) were used to temporarily Ñnance the
repatriation of approximately $550 million pursuant to the Act. These temporary borrowings are being paid oÅ
with Starwood Italia asset sales, and as of December 31, 2005, approximately 175 million euros had been
repaid. The Company expects the remainder of these borrowings to be repaid over the course of 2006.
In August 2004, the Company completed a $300 million addition to the term loan under its existing
Senior Credit Facility. As of December 31, 2005, the Senior Credit Facility consisted of a $1.0 billion
revolving loan and a $450 million term loan, each maturing in 2006 with a one year extension option and had
an interest rate of LIBOR plus 1.25% (""Previous Senior Credit Facility''). The proceeds of the Previous
Senior Credit Facility were used to repay a portion of the then existing revolving credit facility and for general
corporate purposes. In February 2006 the Company closed a new, Ñve-year $1.5 billion Senior Credit Facility
(""2006 Facility'') which replaces the Previous Senior Credit Facility. Approximately $240 million of the
Term Loan balance under the Previous Senior Credit Facility was paid down with cash and the remainder was
reÑnanced with the 2006 Facility. The 2006 Facility is expected to be used for general corporate purposes. The
2006 Facility matures February 10, 2011 and has a current interest rate of LIBOR plus 0.70%. The Company
currently expects to be in compliance with all covenants of the 2006 Facility.
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 (the ""Convertible Debt''). Gross proceeds received were used to repay a portion of
the Company's Senior Credit Facility and for other operational purposes. Holders may Ñrst present their
Convertible Debt to the Company for repurchase in May 2006. One of the trigger events for the Convertible
Debt is met if the closing sale price per Share is $60 or more for a speciÑed length of time. During the fourth
quarter of 2005, this trigger event was met. The Company expects to settle the principal portion of the
Convertible Debt in cash with the excess amount settled in Shares. As a result, approximately 400,000 Shares
were included in the diluted Shares for the year ended December 31, 2005 based on the Company's closing
stock price of $63.86 on December 30, 2005.
The Company had the ability to draw down on its Revolving Credit Facility in various currencies.
Drawdowns in currencies other than the U.S. dollar represent a natural hedge of the Company's foreign
denominated net assets and operations. At December 31, 2005, the Company had $11 million drawn in
Canadian dollars.
The Previous Senior Credit Facility (and now the 2006 Facility), the Senior Notes and the Convertible
Debt are guaranteed by the Sheraton Holding Corporation, a wholly owned subsidiary of the Corporation. The
Sheraton Holding public debt is guaranteed by the Corporation. See Note 24. Guarantor Subsidiary for
consolidating Ñnancial information for Starwood Hotels & Resorts Worldwide, Inc. (the ""Parent''), Sheraton
Holding Corporation (the ""Guarantor Subsidiary'') and all other legal entities that are consolidated into the
Company's results including the Trust, but which are not the Guarantor Subsidiary (the ""Non-Guarantor
Subsidiaries'').
The Company maintains lines of credit under which bank loans and other short-term debt are drawn. In
addition, smaller credit lines are maintained by the Company's foreign subsidiaries. The Company had
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