Freeport-McMoRan 2003 Annual Report Download - page 62

FCX used a portion of the net proceeds from
senior note offerings discussed below to repay all its
outstanding credit facilities debt in 2003, which
totaled $279.0 million at December 31, 2002. In
October 2003, FCX and PT Freeport Indonesia
entered into an amended $165 million revolving
credit facility, which may be increased up to $350
million with additional lender commitments. The
facility matures in September 2006. The credit facil-
ity allows common stock dividends, common stock
purchases and investments as long as availability
under the facility plus available cash exceeds $200
million or otherwise as long as certain other thresh-
olds are exceeded. The facility also sets limitations
on liens and limitations on transactions with affiliates,
and requires that certain financial ratios be main-
tained. Security for obligations outstanding under
the credit facility includes over 80 percent of PT
Freeport Indonesia’s assets, 50.1 percent of the out-
standing stock of PT Freeport Indonesia, the out-
standing stock of PT Indocopper Investama owned
by FCX, and a pledge of PT Freeport Indonesia’s rights
under its Contract of Work (see Note 10). PT Freeport
Indonesia and FCX guarantee each other’s obligations
under the credit facility. No amounts are currently
outstanding under the facility. FCX and PT Freeport
Indonesia recorded charges to other expense totaling
$5.6 million, $3.7 million to net income, in 2003
to accelerate amortization of deferred financing costs
related to the prior credit facility.
Senior Notes. In January 2003, FCX sold $500
million of 10
1
/ 8 % Senior Notes due 2010 for net pro-
ceeds of $487.3 million. Interest on the notes is
payable semiannually on February 1 and August 1 of
each year, beginning August 1, 2003. FCX may
redeem some or all of the notes at its option at a
make-whole redemption price prior to February 1,
2007, and afterwards at stated redemption prices.
The indenture governing the notes contains restrictions
and limitations on incurring debt, creating liens,
entering into sale leaseback transactions, taking
actions to limit distributions from certain sub-
sidiaries, selling assets, entering into certain trans-
actions with affiliates, paying cash dividends on
common stock, repurchasing or redeeming common
or preferred equity, prepaying subordinated debt and
making investments. The notes are unsecured.
In February 2003, FCX sold $575 million of 7%
Convertible Senior Notes due 2011 for net proceeds
of $559.1 million. Interest on the notes is payable
semiannually on March 1 and September 1 of each
year, beginning September 1, 2003. The notes are
convertible, at the option of the holder, at any time
on or prior to maturity into shares of FCX’s common
stock at a conversion price of $30.87 per share,
which is equal to a conversion rate of approximately
32.39 shares of common stock per $1,000 principal
amount of notes. The notes are unsecured.
In January 2004, FCX sold $350.0 million of 6
7
/ 8 %
Senior Notes due 2014 for net proceeds of approxi-
mately $344 million. Interest on the notes is payable
semiannually on February 1 and August 1 of each year,
beginning August 1, 2004. FCX may redeem some
or all of the notes at its option at a make-whole
redemption price prior to February 1, 2009, and
afterwards at stated redemption prices. The inden-
ture governing the notes contains terms similar to
the indenture for FCX’s 10
1
/ 8 % Senior Notes, and
the notes are unsecured.
In 2001, FCX sold $603.8 million of
8
1
/ 4 %
Convertible Senior Notes due January 2006 ( 8
1
/ 4 %
Notes) for net proceeds of $582.6 million. Interest
on the notes is payable semiannually on January 31
and July 31 of each year. The 8
1
/ 4 % Notes are con-
vertible, at the option of the holder, at a conversion
price of $14.30 per share, which is equal to a con-
version rate of approximately 69.9301 shares of
FCX’s common stock per $1,000 principal amount of
notes. A portion of the net proceeds was used to
purchase $139.8 million of U.S. government securities
($24.0 million remaining at December 31, 2003),
which secure and are being used to pay scheduled
interest payments on the notes through July 2004.
The notes are otherwise unsecured. In August 2003,
FCX privately negotiated the early conversion of
51.5 percent of its
8
1
/ 4 % Notes, which resulted in a
$311.1 million reduction in debt, the issuance of
21.76 million shares of FCX common stock in accor-
dance with the terms of the notes and the payment
of $23.0 million in cash from restricted investments
held in escrow for payment of future interest on
these notes. FCX recorded charges totaling $24.7
million ($24.2 million to net income) related to the
conversion. In January 2004, FCX completed a tender
offer and privately negotiated transactions for a por-
tion of the remaining
8
1
/ 4 % Notes, resulting in the
early conversion of $225.8 million of notes into 15.8
million shares of FCX common stock. FCX expects to
record an approximate $5 million net charge to net
income in the first quarter of 2004 in connection
with these transactions. After January 2004, $66.8
million of the 8
1
/ 4 % Notes remain outstanding and
are callable beginning in August 2004.
In April 2003, FCX concluded tender offers for its
7.20% Senior Notes due 2026 and its 7.50% Senior
Notes due 2006. Of the total $450 million outstand-
ing at December 31, 2002, notes with a face
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
60 FREEPORT-McMoRan COPPER & GOLD INC. 2003 Annual Report