Waste Management 2008 Annual Report Download - page 113
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Please find page 113 of the 2008 Waste Management annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.As of December 31, 2008, no borrowings were outstanding under these letter of credit facilities, and we had
unused and available credit capacity of $8 million.
Canadian Credit Facility — In November 2005, Waste Management of Canada Corporation, one of our
wholly-owned subsidiaries, entered into a three-year credit facility agreement with an initial credit capacity of up to
Canadian $410 million. The agreement was entered into to facilitate WMI’s repatriation of accumulated earnings
and capital from its Canadian subsidiaries. In December 2007, we amended the agreement, increasing the available
capacity, which had been reduced to Canadian $305 million due to debt repayments, to Canadian $340 million,
extending the maturity date to November 2012 and adding an uncommitted option to increase the capacity by an
additional Canadian $25 million.
As of December 31, 2008, we had US$247 million of principal (US$242 million net of discount) outstanding
under this credit facility. Advances under the facility do not accrue interest during their terms. Accordingly, the
proceeds we initially received were for the principal amount of the advances net of the total interest obligation due
for the term of the advance, and the debt was initially recorded based on the net proceeds received. The advances
have a weighted average effective interest rate of 3.3% at December 31, 2008, which is being amortized to interest
expense with a corresponding increase in our recorded debt obligation using the effective interest method. During
the year ended December 31, 2008, we increased the carrying value of the debt for the recognition of US$13 million
of interest expense. A total of US$53 million of advances under the facility matured during 2008 and were repaid
with available cash. Accounting for changes in the Canadian currency translation rate decreased the carrying value
of these borrowings by US$54 million during 2008.
Our outstanding advances mature less than one year from the date of issuance, but may be renewed under the
terms of the facility, which matures in November 2012. We currently expect to repay US$33 million of our
borrowings under the facility with available cash and refinance the remaining borrowings. Accordingly,
US$209 million of these borrowings are classified as long-term in our December 31, 2008 Consolidated Balance
Sheet based on our intent and ability to refinance the obligations under the terms of the facility. As of December 31,
2007, we had expected to repay a portion of our borrowings under the facility with available cash and refinance the
remaining borrowings under the terms of the facility. Based on our expectations at that time, we classified
US$55 million as current and US$281 million as long-term in our December 31, 2007 Consolidated Balance Sheet.
Senior notes — In March 2008, we issued $600 million of 6.1% senior notes due March 15, 2018. The net
proceeds from the debt issuance were $594 million. A portion of the proceeds from this offering was used to repay
$250 million of outstanding borrowings under our revolving credit facility. The remaining proceeds from the
offering were used for the early redemption of $244 million of 8.75% senior notes that matured in May 2018, but
became callable by us beginning in May 2008. We elected to call the notes in May 2008 due to their relatively high
interest rate. As a result of the early retirement of these senior notes, we recognized a net reduction in interest
expense of approximately $10 million for the immediate recognition of fair value adjustments associated with
terminated interest rate swaps that had been deferred and were being amortized over the life of the debt.
In connection with our March 2008 issuance of the senior notes, we executed interest rate swap contracts with a
total notional value of $200 million. We designated these fixed-to-floating interest rate swap agreements as fair
value hedges, resulting in all fair value adjustments being reflected as a component of the carrying value of the
underlying debt.
On November 15, 2008, $386 million of 6.5% senior notes matured and were repaid with $300 million of
borrowings under the revolving credit facility and available cash. We have $500 million of 6.875% senior notes that
mature in May 2009 that we currently expect to refinance on a long-term basis by issuing new senior notes. If the
credit markets are not available to us, or are not available on terms we deem acceptable, we expect to rely on our
available cash and the cash we generate from our operations to repay this debt. While we intend to refinance this
debt on a long-term basis, it has been classified as current in the December 31, 2008 Consolidated Balance Sheet
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WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)