Medtronic 2016 Annual Report Download - page 98

Table of Contents
Medtronic plc
Notes to Consolidated Financial Statements (Continued)
95
In April 2016, the Company completed a cash tender offer and redemption of $2.7 billion of senior notes for $3.0 billion of total
consideration. We recognized a loss on debt extinguishment of $163 million, which included cash premiums and accelerated
amortization of deferred financing costs and debt discounts and premiums. The loss on debt extinguishment was recorded in the
interest expense in the consolidated statement of income. In addition to the loss on debt extinguishment, we recognized $20 million
of interest expense due to the acceleration of net losses on forward starting interest rate derivatives, which had been terminated at
the time of original debt issuances, relating to the portion of debt extinguished in the tender offer.
On January 26, 2015, Medtronic and Medtronic Luxco each provided a full and unconditional guarantee of the Senior Note
obligations of Medtronic, Inc. and of Covidien International Finance S.A., a Luxembourg company (“CIFSA”).
On December 10, 2014, the Company issued seven tranches of Senior Notes (collectively the 2015 Senior Notes) with an aggregate
face value of $17.0 billion, resulting in cash proceeds of approximately $16.8 billion, net of discounts and issuance costs. The first
tranche consisted of $1.0 billion of 1.500 percent Senior Notes due 2018. The second tranche consisted of $2.5 billion of 2.500
percent Senior Notes due 2020. The third tranche consisted of $500 million of floating rate Senior Notes due 2020 (the 2020
floating rate notes). The 2020 floating rate notes bear interest at the three-month London InterBank Offered Rate (LIBOR) plus 80
basis points. The fourth tranche consisted of $2.5 billion of 3.150 percent Senior Notes due 2022. The fifth tranche consisted
of $4.0 billion of 3.500 percent Senior Notes due 2025. The sixth tranche consisted of $2.5 billion of 4.375 percent Senior Notes
due 2035. The seventh tranche consisted of $4.0 billion of 4.625 percent Senior Notes due 2045. Interest on the 2020 floating rate
notes is payable quarterly and interest on each series of the fixed rate notes is payable semi-annually. The Company used the
combined proceeds from the 2015 Senior Notes and the $3.0 billion borrowed for a term of three years under the Term Loan Credit
Agreement (as defined below) to fund the approximately $16 billion cash consideration portion of the January 26, 2015
estimated $50 billion acquisition of Covidien, to pay certain transaction and financing expenses, and for working capital and
general corporate purposes, which may include repayment of indebtedness.
As of January 26, 2015, Covidien had $5.0 billion aggregate principal amount issued and outstanding consisting of $750
million aggregate principal amount of 2.950 percent senior notes due 2023, $600 million aggregate principal amount of 1.350
percent senior notes due 2015, $650 million aggregate principal amount of 3.200 percent senior notes due 2022, $400
million aggregate principal amount of 2.800 percent senior notes due 2015, $600 million aggregate principal amount of 4.200
percent senior notes due 2020, $1.2 billion aggregate principal amount of 6.000 percent senior notes due 2018 and $850
million aggregate principal amount of 6.550 percent senior notes due 2037 (collectively, the “CIFSA Senior Notes”). The Company
recorded a fair value adjustment as required upon acquisition and subsequently recorded a premium totaling $607 million related
to CIFSA Senior Notes.
As of April 29, 2016 and April 24, 2015, the Company had interest rate swap agreements designated as fair value hedges of certain
underlying fixed-rate obligations including the Company’s $500 million 4.125 percent 2011 Senior Notes, and $675 million 3.125
percent 2012 Senior Notes. As of April 24, 2015, the Company also had an interest rate swap agreement designated as a fair value
hedge underlying the fixed rate obligation related to the Company's $600 million 4.750 percent 2005 Senior Notes and the $500
million 2.625 percent 2011 Senior Notes, which were due during fiscal year 2016. For additional information regarding the interest
rate swap agreements, refer to Note 8.
Term Loan On January 26, 2015, Medtronic, Inc. borrowed $3.0 billion for a term of three years under that certain Senior
Unsecured Term Loan Credit Agreement (the “Term Loan Credit Agreement”), among Medtronic, Inc., Medtronic, Medtronic
Luxco, the lenders from time to time party thereto and Bank of America, N.A., as administrative agent, to finance, in part, the cash
component of the Arrangement Consideration and certain transaction expenses. Medtronic and Medtronic Luxco have guaranteed
the obligations of Medtronic, Inc. under the Term Loan Credit Agreement.