Union Pacific 2009 Annual Report Download - page 87

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As a result of the merger of Missouri Pacific Railroad Company (MPRR) with and into UPRR on January
1, 1997, and pursuant to the underlying indentures for the MPRR mortgage bonds, UPRR must maintain
the same value of assets after the merger in order to comply with the security requirements of the
mortgage bonds. As of the merger date, the value of the MPRR assets that secured the mortgage bonds
was approximately $6.0 billion. In accordance with the terms of the indentures, this collateral value must
be maintained during the entire term of the mortgage bonds irrespective of the outstanding balance of
such bonds.
Credit Facilities – On December 31, 2009, we had $1.9 billion of credit available under our revolving
credit facility (the facility). The facility is designated for general corporate purposes and supports the
issuance of commercial paper. We did not draw on the facility during 2009. Commitment fees and interest
rates payable under the facility are similar to fees and rates available to comparably rated, investment-
grade borrowers. The facility allows for borrowings at floating rates based on London Interbank Offered
Rates, plus a spread, depending upon our senior unsecured debt ratings. The facility requires us to
maintain a debt-to-net-worth coverage ratio as a condition to making a borrowing. At December 31, 2009,
and December 31, 2008 (and at all times during these periods), we were in compliance with this covenant.
The definition of debt used for purposes of calculating the debt-to-net-worth coverage ratio includes,
among other things, certain credit arrangements, capital leases, guarantees and unfunded and vested
pension benefits under Title IV of ERISA. At December 31, 2009, the debt-to-net-worth coverage ratio
allowed us to carry up to $33.9 billion of debt (as defined in the facility), and we had $10.4 billion of debt
(as defined in the facility) outstanding at that date. Under our current capital plans, we expect to continue
to satisfy the debt-to-net-worth coverage ratio; however, many factors beyond our reasonable control
(including the Risk Factors in Item 1A of this report) could affect our ability to comply with this
provision in the future. The facility does not include any other financial restrictions, credit rating triggers
(other than rating-dependent pricing), or any other provision that could require us to post collateral. The
facility also includes a $75 million cross-default provision and a change-of-control provision. The facility
will expire in April 2012 in accordance with its term, and we currently intend to replace the facility with a
substantially similar credit agreement on or before the expiration date, which is consistent with our past
practices with respect to our credit facilities.
At December 31, 2009, we had no commercial paper outstanding. Outstanding commercial paper
balances are supported by our revolving credit facility but do not reduce the amount of borrowings
available under the facility. During 2009, we issued $100 million of commercial paper and repaid $200
million.
Dividend Restrictions – Our revolving credit facility includes a debt-to-net worth covenant that, under
certain circumstances, restricts the payment of cash dividends to our shareholders. The amount of retained
earnings available for dividends was $11.7 billion and $10.5 billion at December 31, 2009 and 2008,
respectively.
Shelf Registration Statement and Significant New Borrowings – Under our current shelf registration
statement, we may issue, from time to time, any combination of debt securities, preferred stock, common
stock, or warrants for debt securities or preferred stock in one or more offerings.