Western Union 2008 Annual Report Download - page 34

WESTERN UNION
2008 Annual Report
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Commercial Paper
Pursuant to our commercial paper program, we may issue
unsecured commercial paper notes in an amount not to
exceed $1.5 billion outstanding at any time. Our commer-
cial 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 com-
mercial paper borrowings at December 31, 2008 and 2007
had a weighted-average interest rate of approximately
4.1% and 5.5%, respectively, and weighted-average initial
terms of 27 days and 36 days, respectively.
Revolving Credit Facility
Our revolving credit facility expires in 2012 and 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”). 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
a selected LIBOR rate plus an interest rate margin of 19
basis points. A facility fee of 6 basis points on the total
facility is payable quarterly regardless of usage. 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 bor-
rowings under the Revolving Credit Facility exceed 50%
of the related aggregate commitments, a utilization fee
of 5 basis points as of December 31, 2008 based upon
such ratings is payable to the lenders on the aggregate
outstanding borrowings.
As of December 31, 2008, we had no outstanding
borrowings and had approximately $1.4 billion available
to borrow, which is net of our current commercial paper
borrowings backed by this Revolving Credit Facility. Our
Revolving Credit Facility, which is diversified through a
group of 15 participating institutions, is used to provide
general liquidity for us and to support our commercial
paper program, which we believe enhances our short term
credit rating. The largest commitment from any single finan-
cial institution within the total committed balance of $1.5
billion is approximately 20%. All banks within this group
were rated at least an A- or better as of December 31,
2008. If the amount available to borrow under the Revolving
Credit Facility decreased, or if the Revolving Credit Facility
were eliminated, the cost and availability of borrowing
under the commercial paper program may be impacted.
Term Loan
On December 5, 2008, we entered into a senior, unsecured,
364-day term loan in an aggregate principal amount of
$500 million (the “Term Loan”) with a syndicate of lenders.
The Term Loan was used for general corporate purposes,
including the repayment of commercial paper utilized to
retire $500 million of floating rate notes that came due on
November 17, 2008. The Term Loan allows the selection
between two different interest rate calculations. For the
current period, we selected an interest rate calculation
using the one-month LIBOR plus a 2% applicable margin
(3.875% at December 31, 2008). A loan fee is also payable
quarterly, beginning December 31, 2008, on the total loan
(50 basis points as of December 31, 2008). The applicable
margin and loan fee percentage are determined based
on our credit ratings assigned by S&P and/or Moody’s.
A duration fee is payable 90 days and 180 days after the
closing date of December 5, 2008 equal to 0.25% and
0.50%, respectively, of the loan balance on each date.
Notes
On September 29, 2006, we issued $1.0 billion aggregate
principal amount of unsecured notes maturing on October1,
2016. Interest on the 2016 Notes is payable semiannually on
April 1 and October 1 each year. 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 aggre-
gate 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 and $500 million aggregate principal amount
of notes due 2036 (the “2036 Notes”). The Floating Rate
Notes were redeemed upon maturity in November 2008.
Interest with respect to the 2011 Notes and 2036
Notes is payable semiannually in arrears on May 17 and
November 17 each year. We may redeem the 2011 Notes
and the 2036 Notes at any time prior to maturity at the
applicable treasury rate plus 15 basis points and 25 basis
points, respectively.
Credit Ratings and Debt Covenants
The credit ratings on our debt are an important consid-
eration in managing our financing costs and facilitating
access to additional capital on favorable terms. Factors
that we believe are important in assessing our credit rat-
ings include earnings, cash flow generation, leverage,
available liquidity and overall business risks.
Our Revolving Credit Facility contains a facility fee and
a utilization fee, and our Term Loan contains a loan fee and
an application margin, all of which is determined based
on our credit rating assigned by S&P and/or Moody’s,
as further described above. We do not have any other
terms within our debt agreements or other contracts that
are tied to changes in our credit ratings. The table below
summarizes our credit ratings as of December 31, 2008:
December 31, 2008 S&P Moody’s Fitch
Short-term rating A-2 P-2 F2
Senior unsecured A- A3 A-
Ratings outlook Stable Stable Stable
These ratings are not a recommendation to buy, sell or
hold any of our securities. Our credit ratings may be sub-
ject to revision or withdrawal at any time by the assigning
rating organization, and each rating should be evaluated
independently of any other rating. We cannot ensure that
a rating will remain in effect for any given period of time
or that a rating will not be lowered or withdrawn entirely
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