Black & Decker 2012 Annual Report Download - page 83

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The Company may, so long as there is no event of default with respect to the debentures, defer interest payments on the
debentures, from time to time, for one or more Optional Deferral Periods (as defined in the indenture governing the 2052
Subordinated Debentures) of up to five consecutive years per period. Deferral of interest payments cannot extend beyond the
maturity date of the debentures. Additionally, the 2052 Subordinated Debentures include an optional redemption whereby the
Company may elect to redeem the debentures, in whole or in part, at the redemption price plus accrued and unpaid interest if
redeemed before July 25, 2017, or at 100% of their principal amount plus accrued and unpaid interest if redeemed after July 25,
2017.
In May 2012, the Company repaid the $320.0 million principal of its Convertible Notes at maturity, in cash. Additionally, the
Company settled the conversion option value by delivering 640,018 common shares. The conversion rate was 15.6666 per
$1,000 note (equivalent to a conversion price set at $63.83 per common share), and the applicable market value of the
Company's stock at settlement was $73.24. The Company's Bond Hedge also matured May 17, 2012 resulting in the receipt of
640,772 common shares from the counterparties. The aggregate effect of these financial instruments was a 754 share reduction
in the Company’s common shares. During August and September 2012, 4,938,624 stock warrants associated with the
Convertible Notes expired. No shares were issued upon their expiration as the warrants were out of the money.
In November 2011, the Company issued $400.0 million of senior unsecured Term Notes, maturing on December 1, 2021
(“2021 Term Notes”) with fixed interest payable semi-annually in arrears at a rate of 3.40% per annum. The 2021 Term Notes
rank equally with all of the Company’s existing and future unsecured and unsubordinated debt. The 2021 Term Notes are
guaranteed on a senior unsecured basis by The Black & Decker Corporation, a subsidiary of the Company, and are not
obligations of or guaranteed by any of the Company’s other subsidiaries. As a result, the 2021 Term Notes are structurally
subordinated to all debt and other liabilities of the Company’s subsidiaries, other than The Black & Decker Corporation. The
Company received net proceeds of $397.0 million which reflects a discount of $0.4 million to achieve a 3.40% interest rate and
paid $2.6 million of fees associated with the transaction. The Company used the net proceeds from the offering primarily to
reduce its short term borrowings under its existing commercial paper program. The 2021 Term Notes include a Change of
Control provision that would apply should a Change of Control event (as defined in the Indenture governing the 2021 Term
Notes) occur. The Change of Control provision states that the holders of the Term Notes may require the Company to
repurchase, in cash, all of the outstanding 2021 Term Notes for a purchase price at 101.0% of the original principal amount,
plus any accrued and unpaid interest outstanding up to the repurchase date. Additionally, the 2021 Term Notes include a par
call whereby the Company, on or after September 1, 2021, may elect to repay the notes at par. The $417.1 million of debt
reported at December 29, 2012 reflects the fair value adjustment related to a fixed-to-floating interest rate swap entered into in
December 2011, as detailed in Note I, Derivative Financial Instruments.
In 2010, the Company acquired $1.832 billion of total debt and short-term borrowings in connection with the Merger which
included $157.1 million to increase the debt balance to its estimated fair value. Principal amounts and maturities of the notes
acquired in the Merger were: $400.0 million due in 2011, $300.0 million due in 2014, $350.0 million due in 2014, $300.0
million due in 2016 and $150.0 million due in 2028. As noted above, in 2012, The Company repurchased the $300.0 million
notes due 2014 and $350 million notes due 2014. $175.0 million of assumed short-term borrowings were repaid in April 2010
with the proceeds from additional commercial paper borrowings. The Company executed a full and unconditional guarantee of
the existing debt of The Black & Decker Corporation and Black & Decker Holdings, LLC (this guarantee is applicable to all of
the Black & Decker outstanding notes payable), and Black & Decker executed a full and unconditional guarantee of the
existing debt of the Company, excluding the Company’s Junior Subordinated Debt (redeemed in December 2010), including
for payments of principal and interest and as such these notes rank equally in priority with the Company’s unsecured and
unsubordinated debt. Refer to Note U, Parent and Subsidiary Debt Guarantees, for additional information pertaining to these
debt guarantees.
In August 2010, the Company issued $400.0 million of senior unsecured Term Bonds, maturing on September 1, 2040 (“2040
Term Bonds”) with fixed interest payable semi-annually, in arrears at a rate of 5.20% per annum. The 2040 Term Bonds rank
equally with all of the Company’s existing and future unsecured and unsubordinated debt. The 2040 Term Bonds are
guaranteed on a senior unsecured basis by The Black & Decker Corporation, a subsidiary of the Company. The 2040 Term
Bonds are not obligations of or guaranteed by any of the Company’s other subsidiaries. As a result, the 2040 Term Bonds are
structurally subordinated to all debt and other liabilities of the Company’s subsidiaries other than The Black & Decker
Corporation. The Company received net proceeds of $396.2 million which reflects a discount of $0.4 million to achieve a
5.20% interest rate and paid $3.4 million of fees associated with the transaction. The Company used the net proceeds from the
offering primarily to reduce borrowings under its existing commercial paper program. The 2040 Term Bonds include a Change
of Control provision that would apply should a Change of Control event (as defined in the Indenture governing the 2040 Term
Bonds) occur. The Change of Control provision states that the holders of the Term Bonds may require the Company to
repurchase, in cash, all of the outstanding 2040 Term Bonds for a purchase price at 101.0% of the original principal amount,
plus any accrued and unpaid interest outstanding up to the repurchase date.