Western Union 2010 Annual Report Download - page 117

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15. Borrowings
The Company’s outstanding borrowings at December 31, 2010 and 2009 consisted of the following (in millions):
December 31, 2010 December 31, 2009
Due in less than one year (a):
5.400% notes (effective rate of 2.7%) due November 2011 (b)(c)..... $ 696.3 $ 1,000.0
Due in greater than one year (a):
6.500% notes (effective rate of 5.5%) due 2014 .......................... 500.0 500.0
5.930% notes due 2016 (d) ........................................................ 1,000.0 1,000.0
5.253% notes due 2020 (b) ........................................................ 324.9 —
6.200% notes due 2036 (d) ........................................................ 500.0 500.0
6.200% notes due 2040 (e) ........................................................ 250.0 —
Other borrowings ................................................................................. 5.9 6.0
Total borrowings at par value ............................................................... 3,277.1 3,006.0
Fair value hedge accounting adjustments, net (a) ......................... 36.6 47.1
Unamortized discount, net (b) .................................................... (23.8) (4.6)
Total borrowings at carrying value (f) ................................................... $ 3,289.9 $ 3,048.5
(a) The Company utilizes interest rate swaps designated as fair value hedges to effectively change the interest rate
payments on a portion of its notes from fixed-rate payments to short-term LIBOR-based variable rate
payments in order to manage its overall exposure to interest rates. The changes in fair value of these interest
rate swaps result in an offsetting hedge accounting adjustment recorded to the carrying value of the related
note. These hedge accounting adjustments will be reclassified as reductions to or increases in “Interest
expense” over the life of the related notes, and cause the effective rate of interest to differ from the notes’stated
rate.
(b) On March 30, 2010, the Company exchanged $303.7 million of aggregate principal amount of the
5.400% notes due 2011 (“2011 Notes”) for 5.253% unsecured notes due 2020 (“2020 Notes”). The 5.7%
effective interest rate of the 2020 Notes differs from the stated rate as the notes have a par value of
$324.9 million. The $21.2 million difference between the carrying value and the par value is being accreted
over the life of the 2020 Notes. See below for additional detail relating to the note exchange.
(c) The effective interest rate related to the 2011 Notes includes the impact of the interest rate swaps entered into
in conjunction with the assumption of the money order investments from IPS.
(d) The difference between the stated interest rate and the effective interest rate is not significant.
(e) On June 21, 2010, the Company issued $250.0 million of aggregate principal amount of 6.200% unsecured
notes due 2040 (the “2040 Notes”). In anticipation of this issuance, the Company entered into interest rate
swaps to fix the interest rate of the debt issuance, and recorded a loss on the swaps of $7.5 million, which
increased the effective rate to 6.3%, in “Accumulated other comprehensive loss,” which will be amortized into
interest expense over the life of the 2040 Notes. See below for additional detail relating to the debt issuance.
(f) At December 31, 2010, the Company’s weighted average effective rate on total borrowings was approximately
5.2%.
The aggregate fair value of the Company’s long-term debt, based on quotes from multiple banks, excluding the
impact of related interest rate swaps, was $3,473.6 million and $3,211.3 million at December 31, 2010 and
December 31, 2009, respectively.
The Company’s maturities of borrowings at par value as of December 31, 2010 are $700 million in November
2011, $500 million in 2014 and $2.1 billion beyond 2015.
The Company’s obligations with respect to its outstanding borrowings, as described below, rank equally.
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