US Postal Service 2014 Annual Report Download - page 58

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2014 Report on Form 10-K United States Postal Service 54
Note 5- Payables and Accrued Expenses
The following table summarizes total payables and accrued expenses as of September 30, 2014 and 2013:
(in millions)
2014
2013
Trade payables
$
1,042
$
898
Foreign countries
553
564
U.S. Government
89
112
Other accrued expenses
339
339
Total payables and accrued expenses
$
2,023
$
1,913
Note 6- Debt
Debt Limits
Under the Postal Reorganization Act, as amended by Public Laws 101-227 and 109-435, the Postal Service can issue debt
obligations. The Postal Service is limited by statute to net annual debt increases of $3.0 billion. Total debt cannot exceed $15.0
billion.
Revolving Credit Facilities
The Postal Service has two revolving credit line facilities, renewable annually, with the Federal Financing Bank (“FFB”), a
government-owned corporation under the general supervision of the Secretary of the Treasury, both of which have been
extended until April 2015. One facility, a short-term credit line, enables the Postal Service to draw up to $3.4 billion with two
days prior notice. Borrowings under this credit line are typically on an overnight basis, but can have a maximum term of up to
one year. The second credit line, which only allows for borrowings on an overnight basis, enables borrowings of up to $600
million on the same business day that funds are requested. The interest rates for borrowings under these credit facilities are
determined by the U.S. Treasury each business day. As of September 30, 2014, these two revolving credit facilities were fully
drawn.
Note Purchase Agreement
In addition, under the provisions of a note purchase agreement with the FFB (“Note Purchase Agreement”), the Postal Service
can use a series of other notes with varying provisions to draw upon with two days prior notice. The Note Purchase Agreement,
renewable annually, was extended to September 30, 2015.
These credit line facilities and note arrangements provide the flexibility to borrow short or long-term, using floating or fixed-
rate notes. Fixed-rate notes can be either callable or non-callable at the option of the Postal Service.
Debt, all of which is unsecured and not subject to sinking fund requirements, can be repaid at any time at a price determined by
the Secretary of the Treasury, based on prevailing interest rates in the Treasury Security market at the time of repayment. As of
September 30, 2014, the premium associated with a prepayment of all debt was $368 million based on prevailing interest rates.