Twenty-First Century Fox 2011 Annual Report Download - page 63

Notes to the Consolidated Financial Statements (continued)
In February 2011, NAI, a wholly-owned subsidiary of the Company, issued $1.0 billion of 4.50% Senior Notes due 2021 and $1.5 billion of 6.15% Senior Notes due 2041. The net
proceeds of $2.5 billion will be used for general corporate purposes, including the recent refinancing of near term maturities.
In August 2009, NAI issued $400 million of 5.65% Senior Notes due 2020 and $600 million of 6.90% Senior Notes due 2039 for general corporate purposes. The Company received
proceeds of approximately $989 million on the issuance of this debt, net of expense.
(e) In February 2001, NAI issued Liquid Yield OptionTM Notes (“LYONs”) which pay no interest and had an aggregate principal amount at maturity of $1,515 million, representing a yield of
3.5% per annum on the issue price. The notes were recorded at a discount and were being accreted using the effective interest rate method. On February 28, 2006, 92% of the LYONs were
redeemed for cash at the specified redemption amount of $594.25 per LYON. Accordingly, NAI paid an aggregate of approximately $831 million to the holders of the LYONs that had
exercised this redemption option.
The remaining notes were redeemable at the option of the holders on February 28, 2011 at a price of $706.82 per LYON. During fiscal 2011, the outstanding LYONs were redeemed for
cash of approximately $82 million.
Ratings of Public Debt
The table below summarizes the Company’s credit ratings as of June 30, 2011.
Rating Agency Senior Debt Outlook
Moody’s Baa1 Stable
Standard & Poor’s BBB+ Stable
In July 2011, S&P’s Ratings Services placed the Company’s BBB+ corporate credit rating on CreditWatch with negative implications. Moody’s
Investors Service reaffirmed the Company’s corporate credit rating of Baa1 in July 2011.
Original Currencies of Borrowings
Borrowings are payable in the following currencies:
2011 2010
As of June 30, (in millions)
United States Dollars $15,334 $13,188
Australian Dollars 161 130
Other currencies —2
Total borrowings $15,495 $13,320
The impact of foreign currency movements on borrowings during the fiscal year ended June 30, 2011 was approximately $31 million.
In May 2007, NAI entered into a credit agreement (the “Credit Agreement”), among NAI as Borrower, the Company as Parent Guarantor, the
lenders named therein (the “Lenders”), Citibank, N.A. as Administrative Agent and JPMorgan Chase Bank, N.A. as Syndication Agent. The Credit
Agreement provides a $2.25 billion unsecured revolving credit facility with a sub-limit of $600 million available for the issuance of letters of credit
and has a maturity date of May 2012. Borrowings are in U.S. dollars only, while letters of credit are issuable in U.S. dollars or Euros. The
significant terms of the agreement include the requirement that the Company maintain specific leverage ratios and limitations on secured
indebtedness. NAI pays a facility fee of 0.08% regardless of facility usage. NAI pays interest for borrowings at LIBOR plus 0.27% and pays
commission fees on letters of credit at 0.27%. NAI pays an additional fee of 0.05% if borrowings under the facility exceed 50% of the committed
facility. The interest and fees are based on the Company’s current debt rating. At June 30, 2011, approximately $77 million in standby letters of
credit for the benefit of third parties were outstanding.
NOTE 11. Exchangeable Securities
TOPrS
In November 1996, the Company, through a trust (the “Exchange Trust”) wholly-owned by NAI, issued 10 million 5% TOPrS for aggregate
gross proceeds of $1 billion. Such proceeds were invested in (i) preferred securities representing a beneficial interest of NAI’s 5% Subordinated
Discount Debentures due November 12, 2016 (the “Subordinated Debentures”) and (ii) 10,000,000 warrants to purchase from NAI ordinary
shares of BSkyB (the “Warrants”). During fiscal 2003, approximately 85% of the Company’s outstanding TOPrS and related warrants were
redeemed and, in fiscal 2010, the balance of the TOPrS was redeemed for $134 million.
The total net proceeds from the issuance of the TOPrS were allocated between the fair value of the obligation and the fair value of the
Warrants on their date of issuance. The fair value of the Warrants was determined at the end of each period using the Black-Scholes method. The
original fair value of the obligation was recorded in non-current borrowings and in accordance with ASC 815, the Warrants were reported at fair
value and in non-current other liabilities. As a result of the Company’s redemption of the outstanding TOPrS and related warrants during fiscal
2010, there were no TOPrS included in borrowings or non-current liabilities at June 30, 2011 or 2010.
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