UPS 2013 Annual Report Download - page 100

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
88
Fixed Rate Senior Notes
We have completed several offerings of fixed rate senior notes. All of the notes pay interest semiannually, and allow for
redemption of the notes by UPS at any time by paying the greater of the principal amount or a “make-whole” amount, plus
accrued interest. We subsequently entered into interest rate swaps on several of these notes, which effectively converted the
fixed interest rates on the notes to variable LIBOR-based interest rates. The average interest rate payable on these notes,
including the impact of the interest rate swaps, for 2013 and 2012, respectively, were as follows:
Principal Average Effective
Interest Rate
Value Maturity 2013 2012
4.50% senior notes 1,750 2013 2.43% 2.51%
3.875% senior notes 1,000 2014 0.97% 1.14%
1.125% senior notes 375 2017 0.64% 0.57%
5.50% senior notes 750 2018 2.53% 2.71%
5.125% senior notes 1,000 2019 2.01% 2.20%
3.125% senior notes 1,500 2021 1.11% 1.28%
2.45% senior notes 1,000 2022 0.86% 0.86%
On January 15, 2013, our $1.75 billion 4.50% senior notes matured and were repaid in full. We have classified our
3.875% senior notes with a principal balance of $1.0 billion due in April 2014 as a long-term liability, based on our intent and
ability to refinance the debt as of December 31, 2013.
8.375% Debentures
The 8.375% debentures consist of two separate tranches, as follows:
• $276 million of the debentures have a maturity of April 1, 2030. These debentures have an 8.375% interest rate until
April 1, 2020, and, thereafter, the interest rate will be 7.62% for the final 10 years. These 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.
• $424 million of the debentures have a maturity of April 1, 2020. These 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. We subsequently entered into interest rate swaps on the 2020 notes, which effectively converted the fixed
interest rates on the notes to variable LIBOR-based interest rates. The average interest rate payable on the 2020 notes, including
the impact of the interest rate swaps, for 2013 and 2012 was 5.03% and 5.73%, respectively.
Floating Rate Senior Notes
The floating rate senior notes bear interest at one-month LIBOR less 45 basis points. The average interest rate for 2013
and 2012 was 0.00% for both years. 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. In 2013 and 2012, we redeemed notes with a principal value of $4 and $2 million,
respectively, after put options were exercised by the note holders.