Western Union 2006 Annual Report Download - page 54

WESTERN UNION 2006 Annual Report 52
At December 31, 2006 and 2005, $942.1 million
and $186.8 million, respectively, of our cash and cash
equivalents were held by foreign subsidiaries. The increase
in cash and cash equivalents held outside the United States
is due to the settlement of notes receivable and
payable from and to First Data (net of certain other
payments made to First Data) in connection with the spin-
off. We currently plan to invest these funds through
these foreign subsidiaries, as repatriating most of these
funds to the United States would result in the incurrence
of significant tax obligations.
As an integral part of our business, we receive funds
from money transfers and certain other payment processing
services sold in advance of settlement with payment
recipients. These funds (referred to as “Settlement assets”
on our consolidated balance sheets) are not used to support
our operations. However, we do have the opportunity
to earn income from investing these funds. We maintain
a portion of these settlement assets in highly liquid
investments (classified as “Cash and cash equivalents”
within “Settlement assets”) to fund settlement obligations.
Financing
Commercial Paper Program
On November 3, 2006, we established a commercial
paper program pursuant to which we may issue unsecured
commercial paper notes in an amount not to exceed
$1.5 billion outstanding at any time prior to the commercial
paper program expiration in 2011. Our commercial paper
borrowings may have maturities of up to 397 days from
date of issuance. Interest rates for borrowings are based
on market rates at the time of issuance. Our commercial
paper borrowings at De cember 31, 2006 were
$324.6 million, and had a weighted average interest
rate of approximately 5.4%. At December 31, 2006,
$1,175.4 million remained available to borrow under the
commercial paper program.
Revolving Credit Facility
On September 27, 2006, we entered into a five-year
unsecured revolving credit facility, which includes a
$1.5 billion revolving credit facility, a $250.0 million letter
of credit sub-facility and a $150.0 million swing line
sub-facility (the “Revolving Credit Facility”). The Revolving
Credit Facility contains certain covenants that limit or restrict
the ability of our company and its significant subsidiaries
to incur debt, collateralize, sell, assign, transfer or otherwise
dispose of specified assets, or enter into specified sale
and leaseback transactions. We are also required to maintain
compliance with a consolidated interest coverage ratio
covenant. In connection with the spin-off, we borrowed
$100 million under the Revolving Credit Facility. This amount
was repaid in the fourth quarter. As a result, there were
no borrowings or accrued interest under the Revolving
Credit Facility as of December 31, 2006.
Interest due under the Revolving Credit Facility is fixed
for the term of each borrowing and is payable according
to the terms of that borrowing. Generally, interest is
calculated using LIBOR plus an interest rate margin
(19 basis points as of December 31, 2006). A facility
fee is also payable quarterly on the total facility, regardless
of usage (6 basis points as of December 31, 2006). The
facility fee percentage is determined based on our credit
rating assigned by Standard & Poor’s Ratings Services
(“S&P”) and/or Moody’s Investor Services, Inc. (“Moody’s”).
In addition, to the extent the aggregate outstanding
borrowings under the Revolving Credit Facility exceed 50%
of the related aggregate commitments, a utilization fee
based upon such ratings is payable to the lenders on the
aggregate outstanding borrowings (5 basis points as of
December 31, 2006).
Notes
On September 29, 2006, we issued to First Data $1.0 billion
aggregate principal amount of unsecured notes
maturing on October 1, 2016 (the “2016 Notes”) in partial
consideration for the contribution by First Data to us of
its money transfer and consumer payments businesses
in connection with the spin-off. The 2016 Notes were
issued in reliance on exemptions from the registration
requirements of the Securities Act of 1933, as amended.
Immediately after the spin-off, First Data exchanged the
2016 Notes with two financial institutions for indebtedness
of First Data that the financial institutions held at that
time. The financial institutions then sold the 2016 Notes
in transactions exempt from the registration requirements
of the Securities Act of 1933. We did not receive any of the
proceeds from the subsequent sale of the 2016 Notes.
Interest on the 2016 Notes is payable semiannually
on April 1 and October 1 each year based on a fixed per
annum interest rate of 5.930%. The indenture governing
the 2016 Notes contains covenants that limit or restrict
the ability of our company and other significant subsidiaries
to incur debt (in the case of significant subsidiaries),
collateralize, sell, assign, transfer or otherwise dispose
of specified assets, or enter into sale and leaseback
transactions. We may redeem the 2016 Notes at any time
prior to maturity at the applicable treasury rate plus 20
basis points.
On November 17, 2006, we issued $2 billion aggregate
principal amount of unsecured fixed and floating rate notes,
comprised of $500 million aggregate principal amount of
our Floating Rate Notes due 2008 (the “Floating Rate
Notes”), $1 billion aggregate principal amount notes
due 2011 (the “2011 Notes”) and $500 million aggregate
principal amount of notes due 2036 (the “2036 Notes”).
The Floating Rate Notes, 2011 Notes, and 2036 Notes
were issued in reliance on exemptions from the registration
requirements of the Securities Act of 1933, as amended.