Mattel 2007 Annual Report Download - page 51

charged at various rates selected by Mattel based on Eurodollar rates or bank reference rates. On December 15, 2006,
in addition to the required payment of $50.0 million, MAPS prepaid an incremental $125.0 million of the MAPS term
loan facility. The remaining $50.0 million principal amount, consisting of $14.3 million due on December 15, 2007
and $35.7 million due on December 9, 2008, was prepaid on January 16, 2007. As a result of such pre-payments, the
MAPS term loan facility terminated in accordance with its terms, but the MAPS revolving loan facility remained in
effect. On March 26, 2007, Mattel terminated the MAPS revolving loan facility. Mattel did not incur any early
termination penalties in connection with the termination of the MAPS revolving loan facility.
To finance seasonal working capital requirements of certain foreign subsidiaries, Mattel obtains individual
short-term credit lines with a number of banks. As of December 31, 2007, foreign credit lines totaled
approximately $200 million, a portion of which are used to support letters of credit. Mattel expects to extend the
majority of these credit lines throughout 2008.
In June 2006, Mattel issued $100.0 million of unsecured floating rate senior notes (“Floating Rate Senior
Notes”) due June 15, 2009 and $200.0 million of unsecured 6.125% senior notes (“6.125% Senior Notes”) due
June 15, 2011 (collectively “Senior Notes”). Interest on the Floating Rate Senior Notes is based on the three-
month US dollar LIBOR plus 40 basis points with interest payable quarterly beginning September 15, 2006.
Interest on the 6.125% Senior Notes is payable semi-annually beginning December 15, 2006. The 6.125% Senior
Notes may be redeemed at any time at the option of Mattel at a redemption price equal to the greater of (i) the
principal amount of the notes being redeemed plus accrued interest to the redemption date, or (ii) a “make
whole” amount based on the yield of a comparable US Treasury security plus 20 basis points.
In June 2006, Mattel entered into two interest rate swap agreements on the $100.0 million Floating Rate Senior
Notes, each with a notional amount of $50.0 million, for the purpose of hedging the variability of cash flows in the
interest payments due to fluctuations of the LIBOR benchmark interest rate. These cash flow hedges are accounted
for under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, whereby the hedges are
reported in Mattel’s consolidated balance sheets at fair value, with changes in the fair value of the hedges reflected
in accumulated other comprehensive loss. Under the terms of the agreements, Mattel receives quarterly interest
payments from the swap counterparties based on the three-month LIBOR plus 40 basis points and makes semi-
annual interest payments to the swap counterparties based on a fixed rate of 5.87125%. The three-month LIBOR
used to determine interest payments under the interest rate swap agreements resets every three months, matching the
variable interest on the Floating Rate Senior Notes. The agreements expire in June 2009, which corresponds with
the maturity of the Floating Rate Senior Notes.
In September 2007, a major credit rating agency reaffirmed Mattel’s long-term credit rating at BBB-, but
changed the outlook from positive to stable. In August 2007, another major credit rating agency maintained its long-
term credit rating at BBB, but changed its outlook to positive. In May 2007, an additional credit rating agency
maintained its long-term rating for Mattel at Baa2, but changed its long-term outlook from negative to stable.
Management does not expect these actions to have a significant impact on Mattel’s ability to obtain financing or to
have a significant negative impact on Mattel’s liquidity or results of operations.
Mattel believes its cash on hand at the beginning of 2008 and amounts available under its domestic
unsecured committed revolving credit facility and its foreign credit lines will be adequate to meet its seasonal
financing requirements in 2008. As of December 31, 2007, Mattel had available incremental borrowing resources
totaling approximately $850 million under its domestic unsecured committed revolving credit facility and foreign
credit lines.
Mattel has a $300.0 million domestic receivables sales facility that is a sub-facility of Mattel’s domestic
unsecured committed revolving credit facility. The outstanding amount of receivables sold under the domestic
receivables facility may not exceed $300.0 million at any given time, and the amount available to be borrowed
under the credit facility is reduced to the extent of any such outstanding receivables sold. Under the domestic
receivables facility, certain trade receivables are sold to a group of banks, which currently include, among others,
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