UPS 2009 Annual Report Download - page 94

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
notes at any time by paying the greater of the principal amount or a “make-whole” amount, plus accrued interest.
After pricing and underwriting discounts, we received a total of $1.989 billion in cash proceeds from the
offering. The proceeds from the offering were used for general corporate purposes, including the reduction of our
outstanding commercial paper balance. We subsequently entered into interest rate swaps on the 2014 and
portions of the 2019 notes, which effectively converted the fixed interest rates on the notes to variable LIBOR-
based interest rates. The average interest rate payable on the swaps during 2009 was 1.02% and 1.93% for the
2014 and 2019 notes, respectively.
8.375% Debentures
On January 22, 1998, we exchanged $276 million of an original $700 million in debentures for new
debentures of equal principal with a maturity of April 1, 2030. The new debentures have the same interest rate as
the 8.375% debentures due 2020 until April 1, 2020, and, thereafter, the interest rate will be 7.625% for the final
10 years. The 2030 debentures are redeemable in whole or in part at our option at any time. The redemption price
is equal to the greater of 100% of the principal amount and accrued interest or the sum of the present values of
the remaining scheduled payout of principal and interest thereon discounted to the date of redemption at a
benchmark treasury yield plus five basis points plus accrued interest. The remaining $424 million of 2020
debentures are not subject to redemption prior to maturity. Interest is payable semiannually on the first of April
and October for both debentures and neither debenture is subject to sinking fund requirements.
Floating Rate Senior Notes
The floating rate senior notes bear interest at one-month LIBOR less 45 basis points. The average interest
rates for 2009 and 2008 were 0.01% and 2.48%, respectively. These notes are callable at various times after 30
years at a stated percentage of par value, and putable by the note holders at various times after 10 years at a
stated percentage of par value. The notes have maturities ranging from 2049 through 2053.
Capital Lease Obligations
We have certain aircraft subject to capital leases. Some of the obligations associated with these capital
leases have been legally defeased. The recorded value of aircraft subject to capital leases, which are included in
Property, Plant and Equipment is as follows as of December 31 (in millions):
2009 2008
Aircraft ........................................................... $2,571 $2,571
Accumulated amortization ............................................ (565) (491)
$2,006 $2,080
These capital lease obligations have principal payments due at various dates from 2010 through 2021.
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