Freeport-McMoRan 2013 Annual Report Download - page 99

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2013 ANNUAL REPORT | 97
At December 31, 2013, the outstanding principal amount of the
FM O&G senior notes totaled $6.1 billion, and fair value
adjustments totaled $653 million.
Debentures and Senior Notes issued by FMC. In March 2007, in
connection with the acquisition of FMC, FCX assumed the 71/8%
Debentures due November 2027, the 9½% Senior Notes due
2031 and the 61/8% Senior Notes due March 2034 with a total stated
value of $462 million. These debentures and senior notes 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
acquisition-date fair market value of these obligations. The net
increase in value is being amortized over the term of these
debentures and senior notes and recorded as a net reduction to
interest expense. At December 31, 2013, the outstanding principal
amount of these senior notes and debentures was $346 million.
Early Extinguishment of Debt. In 2013, FCX completed the
following transactions that resulted in a net loss on early
extinguishment of debt of $35 million: (i) the termination of its
$9.5 billion acquisition bridge loan facility, which was entered into
in December 2012 to provide interim financing for the acquisitions
of PXP and MMR but was replaced with other financing, that
resulted in a loss of $45 million; (ii) the repayment of the $3.9 billion
outstanding under PXP’s amended credit facility and the
redemption of all of PXP’s 75/8% Senior Notes due 2018 for
$415 million, which did not result in a gain or loss; partially offset
by (iii) the redemption of MMR’s remaining outstanding 11.875%
Senior Notes due 2014 for $299 million, which resulted in a gain
of $10 million.
In 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 during 2012.
In 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; purchased in an open-market transaction $35
million of the 9½% Senior Notes due 2031 for $49 million; and
entered into a senior unsecured revolving credit facility that
replaced an existing revolving credit facility. As a result of these
transactions, FCX recognized losses on early extinguishment of
debt totaling $68 million during 2011.
Guarantees. In connection with the acquisition of PXP, FCX
guaranteed the PXP senior notes, and the guarantees by certain
PXP subsidiaries were released. Refer to Note 17 for a discussion
of FCX’s senior notes guaranteed by FM O&G LLC.
in part, at the option of FCX, at a make-whole redemption
price prior to September 15, 2042, and thereafter at 100 percent
of principal.
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. 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.
Senior Notes issued by FM O&G. In May 2013, in connection with
the acquisition of PXP, FCX assumed unsecured senior notes with
a stated value of $6.4 billion, which was increased by $716 million
to reflect the acquisition-date fair market value of these senior
notes. The fair value adjustments are being amortized over the
term of the senior notes and recorded as a reduction of interest
expense. These senior notes are redeemable in whole or in part,
at the option of FM O&G LLC, at make-whole redemption prices
prior to the dates stated below, and beginning on the dates stated
below at specified redemption prices. In addition, up to 35 percent
of the principal amount of certain of these senior notes may
be redeemed at specified redemption prices with all or a portion
of the proceeds of an equity issuance by FM O&G LLC. Upon
completion of the acquisition of PXP, FCX guaranteed these senior
notes resulting in an investment grade rating for these senior notes.
Debt Instrument Date
6.125% Senior Notes due 2019 June 15, 2016
8.625% Senior Notes due 2019 October 15, 2014
7.625% Senior Notes due 2020 April 1, 2015
61/2% Senior Notes due 2020 November 15, 2015
6.625%% Senior Notes due 2021 May 1, 2016
6.75% Senior Notes due 2022 February 1, 2017
67/8% Senior Notes due 2023 February 15, 2018
Additionally, in connection with the acquisition of MMR, FCX
assumed MMR’s 11.875% Senior Notes due 2014, 4% Convertible
Senior Notes due 2017 and 5¼% Convertible Senior Notes due
2013 with a total stated value of $558 million, which was increased
by $62 million to reflect the acquisition-date fair market value of
these obligations. During 2013, all of the 11.875% Senior Notes
due 2014 were redeemed, and holders of 4% Convertible Senior
Notes due 2017 and 5¼% Convertible Senior Notes due 2013
converted their notes into merger consideration totaling $306
million, including cash payments of $270 million and 21.0 million
royalty trust units with a fair value of $36 million at the acquisition
date. At December 31, 2013, there were no outstanding amounts
in connection with MMR’s senior notes.