Mattel 2008 Annual Report Download - page 85

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 “2006 Senior Notes”). Interest on the Floating Rate Senior Notes is based on the
three-month US Dollar London Interbank Offered Rate (“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 in 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,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 March 2008, Mattel issued $350.0 million of unsecured 5.625% Senior Notes (“2008 Senior Notes”) due
March 15, 2013. Interest on the 2008 Senior Notes is payable semi-annually on March 15 and September 15 of
each year, beginning September 15, 2008. Mattel may redeem all or part of the 2008 Senior Notes at any time or
from time to time at its option at a redemption price equal to the greater of (i) 100% of the principal amount of
the notes being redeemed plus accrued and unpaid interest to the redemption date, or (ii) a “make-whole” amount
based on the yield of a comparable US Treasury security plus 50 basis points.
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, 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 2009.
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.
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