United Healthcare 2006 Annual Report Download - page 96

On October 16, 2006, we executed a $7.5 billion 364-day revolving credit facility in order to ensure the
Company’s immediate and continued access to additional liquidity. The credit facility is available for working
capital purposes as well as to pay or repay any outstanding borrowings of the Company. We have entered into
amendments to our $7.5 billion credit facility to provide us with additional time to deliver to the lenders our
quarterly reports on Form 10-Q for the quarters ended June 30, 2006 and September 30, 2006 and our annual
report on Form 10-K for the year ended December 31, 2006. As of December 31, 2006, we had no amounts
outstanding under our $7.5 billion credit facility.
In March 2006, we refinanced outstanding commercial paper by issuing $650 million of floating-rate notes due
March 2009, $750 million of 5.3% fixed-rate notes due March 2011, $750 million of 5.4% fixed-rate notes due
March 2016 and $850 million of 5.8% fixed-rate notes due March 2036. The floating-rate notes due March 2009
are benchmarked to the London Interbank Offered Rate (LIBOR) and had an interest rate of 5.5% at
December 31, 2006.
In December 2005, we amended and restated our $1.0 billion five-year revolving credit facility supporting our
commercial paper program. We increased the credit facility to $1.3 billion and extended the maturity date to
December 2010. We have entered into amendments to our $1.3 billion credit facility to provide us with
additional time to deliver to the lenders our quarterly reports on Form 10-Q for the quarters ended June 30, 2006
and September 30, 2006 and our annual report on Form 10-K for the year ended December 31, 2006, to obtain
our lenders agreement and acknowledgement that the delivery of a notice of default or notice of acceleration
under any indenture or credit agreement that is being contested by the Company in good faith does not cause a
default or event of default under the credit agreement, and to obtain a waiver of any potential default that may
arise as a result of our determination that our historical financial information should not be relied upon and as a
result of our restatement of our historical financial statements. As of December 31, 2006, we had no amounts
outstanding under our $1.3 billion credit facility.
In November and December 2005, we issued $2.6 billion of commercial paper primarily to finance the cash
portion of the purchase price of the PacifiCare acquisition described above and to retire a portion of the
PacifiCare debt at the closing of the acquisition, as well as to refinance current maturities of long-term debt.
In October 2005, we executed a $3.0 billion 364-day revolving credit facility to support a $3.0 billion increase in
our commercial paper program in order to finance the cash portion of the PacifiCare acquisition. We terminated
the 364-day revolving credit facility in March 2006.
In March 2005, we issued $500 million of 4.9% fixed-rate notes due March 2015. We used the proceeds from
this borrowing for general corporate purposes, including repayment of commercial paper, capital expenditures,
working capital and share repurchases.
To more closely align interest costs with the floating interest rate received on our cash and cash equivalent
balances, we have entered into interest rate swap agreements to convert the majority of our interest rate exposure
from a fixed rate to a variable rate. These interest rate swap agreements qualify as fair value hedges. The interest
rate swap agreements have aggregate notional amounts of $4.9 billion as of December 31, 2006 with variable
rates that are benchmarked to LIBOR, and are recorded on our Consolidated Balance Sheets. As of December 31,
2006, the aggregate liability, recorded at fair value, for all existing interest rate swaps was approximately $73
million. These fair value hedges are accounted for using the short-cut method under FAS No. 133, “Accounting
for Derivative Instruments and Hedging Activities” (FAS 133), whereby the hedges are reported on our
Consolidated Balance Sheets at fair value, and the carrying value of the long-term debt is adjusted for an
offsetting amount representing changes in fair value attributable to the hedged risk. Since these amounts
completely offset, we have reported both the swap liability and the debt liability within debt on our Consolidated
Balance Sheets, and there have been no net gains or losses recognized in our Consolidated Statements of
Operations. At December 31, 2006, the rates used to accrue interest expense on these agreements ranged from
4.9% to 5.7%.
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