Avis 2006 Annual Report Download - page 88

Table of Contents
(c)
As of December 31, 2005, the balance represents $153 million of net mark-to-market adjustments on current interest rate hedges,
partially offset by $106 million of net gains resulting from the termination of interest rate hedges. The Company repaid all of the
outstanding debt associated with these derivatives and retired all such derivatives during third quarter 2006.
CORPORATE DEBT
In connection with the execution of its separation plan, during July 2006, the Company completed a tender offer for $2.6 billion of its
corporate debt by redeeming approximately $2.5 billion aggregate principal amount of its 6
1
/ 4 % notes due in January 2008 and March
2010, 7
3
/ 8 % notes due in January 2013 and 7
1
/ 8 % notes due in March 2015 for cash of approximately $2.9 billion, including accrued
interest. The Company redeemed the remaining portion of such corporate debt in third quarter 2006. In connection with such debt
extinguishment, the Company recorded a pretax charge of $313 million during 2006. The Company also repaid an aggregate principal
amount of $950 million due in August 2006 under the 6
7
/ 8 % and 4.89% notes during 2006.
On May 10, 2004, the Company’s then outstanding 6
3
/ 4 % senior notes that formed a part of the Upper DECS, a hybrid instrument
previously issued by the Company that consisted of both equity linked and debt securities, were successfully remarketed and the interest
rate was reset to 4.89%. Each Upper DECS consisted of both a senior note and a forward purchase contract to purchase shares of the
Company’s common stock. In connection with such remarketing, during 2004, the Company purchased and retired $763 million of the
senior notes for $778 million in cash and recorded a loss of $18 million on the early extinguishment. The forward purchase contract was
settled on August 17, 2004 (see Note 17—Stockholders’ Equity for more information on the forward purchase contract).
AVIS BUDGET CAR RENTAL CORPORATE DEBT
Floating Rate Term Loan
The Company’s floating rate term loan was entered into in April 2006, has a six year term and bears interest at three month LIBOR plus
125 basis points. Quarterly installment payments are required for the first five and three quarter years with the remaining amount repayable
in full at the end of the term. During 2006, the Company repaid $37 million of outstanding principal under the floating rate term loan.
Floating Rate Notes
The Company’s floating rate notes were issued in April 2006 at 100% of their face value for aggregate proceeds of $250 million. The
interest rate on these notes is equal to three month LIBOR plus 250 basis points. The Company has the right to redeem these notes in
whole or in part at any time prior to May 15, 2008 at the applicable make-whole redemption price and, in whole or in part, at any time on
or after May 15, 2008, at the applicable scheduled redemption price, plus in each case, accrued and unpaid interest through the redemption
date. These notes are senior unsecured obligations and rank equally in right of payment with all the Company’s existing and future senior
indebtedness.
7
5
/ 8 % and 7
3
/ 4 % Notes
The Company’s 7
5
/ 8 % and 7
3
/ 4 % notes were issued in April 2006 at 100% of their face value for aggregate proceeds of $750 million.
The Company has the right to redeem the 7
5
/ 8 % and 7
3
/ 4 % notes in whole or in part at any time prior to May 15, 2010 and May 15,
2011, respectively, at the applicable make-whole redemption price and, in whole or in part, at any time on or after May 15, 2010 and
May 15, 2011,
F
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31
(d)
In connection with the execution of the Company’s separation plan, Avis Budget Car Rental borrowed $1,875 million in April 2006,
which consisted of (i) $1 billion of unsecured fixed and floating rate notes and (ii) an $875 million secured floating rate term loan
under a credit facility.