Mattel 2007 Annual Report Download - page 98

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,
Bank of America, N.A., as administrative agent, Citicorp USA, Inc. and Barclays Bank PLC, as co-syndication
agents, and Societe Generale and BNP Paribas, as co-documentation agents. Pursuant to the domestic receivables
facility, Mattel Sales Corp. and Fisher-Price, Inc. (which are wholly-owned subsidiaries of Mattel) can sell
eligible trade receivables from Wal-Mart and Target to Mattel Factoring, Inc. (“Mattel Factoring”), a Delaware
corporation and wholly-owned, consolidated subsidiary of Mattel. Mattel Factoring is a special purpose entity
whose activities are limited to purchasing and selling receivables under this facility. Pursuant to the terms of the
domestic receivables facility and simultaneous with each receivables purchase, Mattel Factoring sells those
receivables to the bank group. Mattel records the transaction, reflecting cash proceeds and sale of accounts
receivable in its consolidated balance sheet, at the time of the sale of the receivables to the bank group.
Sales of receivables pursuant to the domestic receivables sales facility occur periodically, generally
quarterly. The receivables are sold by Mattel Sales Corp. and Fisher-Price, Inc. to Mattel Factoring for a
purchase price equal to the nominal amount of the receivables sold. Mattel Factoring then sells such receivables
to the bank group at a slight discount, and Mattel acts as a servicer for such receivables. Mattel has designated
Mattel Sales Corp. and Fisher-Price, Inc. as sub-servicers, as permitted by the facility. Mattel’s appointment as a
servicer is subject to termination events that are customary for such transactions. The domestic receivables sales
facility is also subject to conditions to funding, representations and warranties, undertakings and early
termination events that are customary for transactions of this nature. Mattel retains a servicing interest in the
receivables sold under this facility. The fair value of the net servicing asset is based on an estimate of interest
Mattel earns on cash collections prior to remitting the funds to the bank group, partially offset by an estimate of
the cost of servicing the trade receivables sold. The fair value of the net servicing asset totaled $1.9 million and
$2.3 million as of December 31, 2007 and 2006, respectively.
Until the Master Agreement was terminated on February 9, 2007, Mattel International Holdings B.V., a
company incorporated in the Netherlands (the “Depositor”), Mattel France, a company incorporated in France
(“Mattel France”), and Mattel GmbH, a company incorporated in Germany (“Mattel Germany”), each of which is
a subsidiary of Mattel, and Societe Generale Bank Nederland N.V. (“SGBN”), were parties to a Master
Agreement for the Transfer of Receivables that established a Euro 150 million European trade receivables
facility (the “European trade receivables facility”), pursuant to which Mattel France and Mattel Germany sold
trade receivables to SGBN. The European trade receivables facility was subject to conditions to funding,
representations and warranties, undertakings and early termination events that were customary for transactions of
this nature.
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