Freeport-McMoRan 2012 Annual Report Download - page 84

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Revolving Credit Facility. FCX entered into a senior unsecured
revolving credit facility on March 30, 2011, which replaced the
existing revolving credit facilities that were scheduled to mature
on March 19, 2012. FCX recognized a loss on early extinguishment
of debt totaling $7 million ($6 million to net income attributable to
FCX common stockholders) during 2011 associated with this
transaction. The revolving credit facility is available until
March 30, 2016, in an aggregate principal amount of $1.5 billion,
with $500 million available to PT Freeport Indonesia. At
December 31, 2012, FCX had no borrowings and $43 million of
letters of credit issued under the revolving credit facility, resulting
in availability of approximately $1.5 billion, of which $957 million
could be used for additional letters of credit.
Interest on the revolving credit facility is generally based on the
London Interbank Offered Rate (LIBOR) plus 1.75 percent, subject
to an increase or decrease in the interest rate margin based on the
credit ratings assigned to FCX’s senior unsecured debt by
Standard & Poor’s Rating Services and Moody’s Investors Service.
The obligations of FCX and PT Freeport Indonesia under the
revolving credit facility are not guaranteed by any subsidiaries
and are unsecured; however, FCX may at any time designate any
subsidiary (other than PT Freeport Indonesia) as a subsidiary
guarantor.
Senior Notes. In February 2012, FCX sold $500 million of 1.40%
Senior Notes due 2015, $500 million of 2.15% Senior Notes due
2017 and $2.0 billion of 3.55% Senior Notes due 2022 for total net
proceeds of $2.97 billion. Interest on the 1.40% Senior Notes is
payable semiannually on February 13 and August 13. Interest on
the 2.15% Senior Notes and the 3.55% Senior Notes is payable
semiannually on March 1 and September 1. The 1.40% Senior Notes
and the 2.15% Senior Notes are redeemable in whole or in part,
at the option of FCX, at a make-whole redemption price prior to the
redemption date. The 3.55% Senior Notes are redeemable in
whole or in part, at the option of FCX, at a make-whole redemption
price prior to December 1, 2021, and thereafter at 100 percent of
principal. These senior notes rank equally with FCX's other existing
and future unsecured and unsubordinated indebtedness.
In March 2007, in connection with financing FCX’s acquisition of
FMC, FCX sold $3.5 billion of 8.375% Senior Notes due April 2017,
$1.5 billion of 8.25% Senior Notes due April 2015 and $1.0 billion
of Senior Floating Rate Notes due April 2015 for total net
proceeds of $5.9 billion. During 2010, FCX purchased in open-market
transactions $218 million of the 8.25% Senior Notes for $237 million
and $329 million of the 8.375% Senior Notes for $358 million,
which resulted in losses on early extinguishment of debt totaling
$55 million ($48 million to net income attributable to FCX
common stockholders). On April 1, 2010, FCX redeemed all of its
$1 billion of outstanding Senior Floating Rates Notes for which
holders received 101 percent of the principal amount together
with accrued and unpaid interest. As a result of this redemption,
FCX recorded a loss on early extinguishment of debt totaling
$22 million ($20 million to net income attributable to FCX common
stockholders) during 2010. On April 1, 2011, FCX redeemed all its
remaining $1.1 billion of outstanding 8.25% Senior Notes for
which holders received 104.125 percent of the principal amount
together with accrued and unpaid interest. As a result of this
redemption, FCX recorded a loss on early extinguishment of debt
totaling $55 million ($49 million to net income attributable to FCX
common stockholders) during 2011. On March 14, 2012, FCX
redeemed the remaining $3.0 billion of its outstanding 8.375%
Senior Notes due 2017, for which holders received 104.553 percent
of the principal amount together with the accrued and unpaid
interest. As a result of this redemption, FCX recorded a loss on
early extinguishment of debt of $168 million ($149 million to net
income attributable to FCX common stockholders) during 2012.
In March 2007, in connection with the acquisition of FMC, FCX
assumed the 9.5% Senior Notes due 2031, the 6.125% Senior
Notes due March 2034 and the 7.125% Debentures due November
2027 with a stated value of $462 million. These senior notes and
debentures bear interest payable semiannually and are
redeemable in whole or in part, at the option of FCX, at a make-
whole redemption price. The carrying value of these senior notes
and debentures were increased by a net $32 million to reflect the
fair market value at the acquisition date. The net increase in value
is being amortized over the term of these senior notes and
debentures and recorded as a net reduction to interest expense.
During 2010, FCX purchased in an open-market transaction
$18 million of the 9½% Senior Notes for $26 million and recorded
losses on early extinguishment of debt totaling $4 million
($3 million to net income attributable to FCX common stockholders).
During 2011, FCX purchased in an open-market transaction
$35 million of the 9½% Senior Notes for $49 million and recorded
losses on early extinguishment of debt totaling $6 million ($5 million
to net income attributable to FCX common stockholders). At
December 31, 2012, the outstanding principal amount of these
senior notes and debentures was $346 million.
All of FCX’s senior notes are unsecured.
Restrictive Covenants. FCX’s credit facility and senior notes
contain certain restrictive covenants. The credit facility includes
covenants that are typical for investment-grade companies,
including limitations on liens and subsidiary debt. The credit
facility also includes financial ratios governing maximum total
leverage and minimum interest coverage. The senior notes
contain limitations on liens that are generally typical for
investment-grade companies.
Maturities. Maturities of debt instruments based on the
amounts and terms outstanding at December 31, 2012, total
$2 million in 2013, $500 million in 2015, $500 million in 2017 and
$2,525 million thereafter.
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