Starwood 2010 Annual Report Download - page 147

credit outstanding as of December 31, 2010. The new credit agreement includes various customary covenants,
including maintaining leverage and coverage ratios. The Consolidated Leverage Ratio (as defined) maximum of
5.50x will decrease to 5.25x beginning on July 1, 2011 and will thereafter step down in 0.25x increments every six
months, reaching 4.50x beginning on January 1, 2013. The Consolidated Coverage Ratio (as defined) minimum
remains at 2.5x through the term of the agreement.
During 2009, the Company reduced debt by over $1 billion. The Company issued new debt of $750 million and
prepaid debt of $1.675 billion including term loans maturing in 2009, 2010 and 2011 totaling $1.375 billion.
Additional sources of cash generated to pay down debt were proceeds from asset sales, securitizations and a co-
branding arrangement, as described in Notes 5, 10 and 18.
During 2009, the Company entered into six interest rate swap agreements with a notional amount of
$500 million, under which the Company pays floating and receives fixed interest rates (see Note 24).
On December 7, 2009, the Company used the proceeds from a public offering of Senior Notes described below,
together with other borrowings, to complete a tender offer to repurchase $195 million of the principal amount of its
7.875% Senior Notes due 2012 and $105 million of its 6.25% Senior Notes due 2013. In connection with this tender
offer, the Company recorded a $17 million charge to interest expense related to the tender premium and
unamortized debt issue costs.
On November 24, 2009, the Company completed a public offering of $250 million of Senior Notes (“the
7.15% Notes”) due December 1, 2019. The Company received net proceeds of approximately $241 million, which
were used to repurchase a portion of outstanding Senior Notes (discussed above). Interest on the 7.15% Notes is
payable semi-annually on June 1 and December 1. The Company may redeem all or a portion of the 7.15% Notes at
any time at the Company’s option at a price equal to the greater of (1) 100% of the aggregate principal plus accrued
and unpaid interest and (2) the sum of the present values of the remaining scheduled payments of principal and
interest discounted at the redemption rate on a semi-annual basis at the Treasury rate plus 50 basis points, plus
accrued and unpaid interest. The 7.15% Notes rank parri passu with all other unsecured and unsubordinated
obligations. Upon a change in control of the Company, the holders of the 7.15% Notes will have the right to require
repurchase of the respective 7.15% Notes at 101% of the principal amount plus accrued and unpaid interest. Certain
covenants on the 7.15% Notes include restrictions on liens, sale and leaseback transactions, mergers, consolidations
and sale of assets.
On April 30, 2009, the Company completed a public offering of $500 million of senior notes with a coupon rate
of 7.875% (the “7.875% Notes”) due October 15, 2014, issued at a discount price of 96.285%. The Company
received net proceeds of approximately $475 million which were used to reduce the outstanding borrowings under
its previous revolving credit facility and for general purposes. Interest on the 7.875% Notes is payable semi-
annually on April 15 and October 15. The Company may redeem all or a portion of the 7.875% Notes at any time at
the Company’s option at a discount rate of Treasury plus 50 basis points. The 7.875% Notes will rank parri passu
with all other unsecured and unsubordinated obligations. Upon a change in control of the Company, the holders of
the 7.875% Notes will have the right to require repurchase of the 7.875% Notes at 101% of the principal amount
plus accrued and unpaid interest. Certain covenants on the 7.875% Notes include restrictions on liens, sale and
leaseback transactions, mergers, consolidations and sale of assets.
F-31
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS — (Continued)