Southwest Airlines 2006 Annual Report Download - page 61

notes, approximately $297 million, for general corporate
purposes.
During 2006, the Company redeemed the balance
of its $529 million face value Pass Through Certificates;
$65 million for the Class A-1 certificates was redeemed in
May 2006 and $464 million for the Class A-2 and Class B
certificates was redeemed in November 2006. The Com-
pany’s interest rate swap agreement associated with the
Class A-2 certificates, which was reflected as a reduction
in the value of that debt in the amount of $6 million at
December 31, 2005, expired concurrent with the
redemption of those certificates in November 2006.
During 2006, the Company redeemed two separate
$29 million non-interest bearing notes on their maturity
dates of February 24, 2006 and April 28, 2006,
respectively.
During February 2005, the Company issued
$300 million senior unsecured Notes due 2017. The
notes bear interest at 5.125 percent, payable semi-annu-
ally in arrears, with the first payment made on Septem-
ber 1, 2005. Southwest used the net proceeds from the
issuance of the notes, approximately $296 million, for
general corporate purposes.
In fourth quarter 2004, the Company entered into
four identical 13-year floating-rate financing arrange-
ments, whereby it borrowed a total of $112 million from
French banking partnerships. Although the interest on
the borrowings are at floating rates, the Company esti-
mates that, considering the full effect of the “net present
value benefits” included in the transactions, the effective
economic yield over the 13-year term of the loans will be
approximately LIBOR minus 45 basis points. Principal
and interest are payable semi-annually on June 30 and
December 31 for each of the loans, and the Company may
terminate the arrangements in any year on either of those
dates, with certain conditions. The Company pledged
four aircraft as collateral for the transactions.
In September 2004, the Company issued $350 mil-
lion senior unsecured Notes due 2014. The notes bear
interest at 5.25 percent, payable semi-annually in arrears,
on April 1 and October 1. Concurrently, the Company
entered into an interest-rate swap agreement to convert
this fixed-rate debt to a floating rate. See Note 10 for
more information on the interest-rate swap agreement.
Southwest used the net proceeds from the issuance of the
notes, approximately $346 million, for general corporate
purposes.
On March 1, 2002, the Company issued $385 mil-
lion senior unsecured Notes due March 1, 2012. The
notes bear interest at 6.5 percent, payable semi-annually
on March 1 and September 1. Southwest used the net
proceeds from the issuance of the notes, approximately
$380 million, for general corporate purposes. During
2003, the Company entered into an interest rate swap
agreement relating to these notes. See Note 10 for further
information.
In fourth quarter 1999, the Company entered into
two identical 13-year floating rate financing arrange-
ments, whereby it borrowed a total of $56 million from
French banking partnerships. Although the interest on
the borrowings are at floating rates, the Company esti-
mates that, considering the full effect of the “net present
value benefits” included in the transactions, the effective
economic yield over the 13-year term of the loans will be
approximately LIBOR minus 67 basis points. Principal
and interest are payable semi-annually on June 30 and
December 31 for each of the loans and the Company may
terminate the arrangements in any year on either of those
dates, with certain conditions. The Company pledged
two aircraft as collateral for the transactions.
On February 28, 1997, the Company issued
$100 million of senior unsecured 73⁄8% Debentures due
March 1, 2027. Interest is payable semi-annually on
March 1 and September 1. The debentures may be
redeemed, at the option of the Company, in whole at
any time or in part from time to time, at a redemption
price equal to the greater of the principal amount of the
debentures plus accrued interest at the date of redemption
or the sum of the present values of the remaining sched-
uled payments of principal and interest thereon, dis-
counted to the date of redemption at the comparable
treasury rate plus 20 basis points, plus accrued interest at
the date of redemption.
During 1992, the Company issued $100 million of
senior unsecured 77⁄8% Notes due September 1, 2007.
Interest is payable semi-annually on March 1 and Sep-
tember 1. The notes are not redeemable prior to maturity.
The net book value of the assets pledged as collateral
for the Company’s secured borrowings, primarily aircraft
and engines, was $164 million at December 31, 2006.
As of December 31, 2006, aggregate annual prin-
cipal maturities of debt and capital leases (not including
amounts associated with interest rate swap agreements,
and interest on capital leases) for the five-year period
ending December 31, 2011, were $123 million in 2007,
42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)