Union Pacific 2011 Annual Report Download - page 39

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The following table lists the outstanding notes and debentures that were exchanged:
Principal amount
Millions exchanged
7.875% Notes due 2019 $ 196
5.450% Notes due 2013 50
5.125% Notes due 2014 45
5.375% Notes due 2014 55
5.700% Notes due 2018 277
5.750% Notes due 2017 178
7.000% Debentures due 2016 38
5.650% Notes due 2017 18
Total $ 857
On July 14, 2010, we exchanged $376 million of 7.875% notes due in 2019 (Existing Notes) for 5.78%
notes (New Notes) due July 15, 2040, plus cash consideration of approximately $96 million and $15
million for accrued and unpaid interest on the Existing Notes. The cash consideration was recorded as an
adjustment to the carrying value of debt, and the balance of the unamortized discount and issue costs
from the Existing Notes is being amortized as an adjustment of interest expense over the term of the New
Notes. There was no gain or loss recognized as a result of the exchange. Costs related to the debt
exchange that were payable to parties other than the debtholders totaled approximately $2 million and
were included in interest expense during the third quarter.
Debt Redemptions – On December 19, 2011, we redeemed the remaining $175 million of our 6.5%
notes due April 15, 2012, and all $300 million of our outstanding 6.125% notes due January 15, 2012.
The redemptions resulted in an early extinguishment charge of $5 million. On March 22, 2010, we
redeemed $175 million of our 6.5% notes due April 15, 2012. The redemption resulted in an early
extinguishment charge of $16 million in the first quarter of 2010. On November 1, 2010, we redeemed all
$400 million of our outstanding 6.65% notes due January 15, 2011. The redemption resulted in a $5
million early extinguishment charge.
Receivables Securitization Facility – On January 1, 2010, we adopted Accounting Standards Update
No. 2009-16, Accounting for Transfers of Financial Assets (ASU 2009-16). ASU 2009-16 limits the
circumstances in which transferred financial assets can be derecognized and requires enhanced
disclosures regarding transfers of financial assets and a transferor’s continuing involvement with
transferred financial assets. As a result, we no longer account for the value of the outstanding undivided
interest held by investors under our receivables securitization facility as a sale. In addition, transfers of
receivables occurring on or after January 1, 2010, are reflected as debt issued in our Consolidated
Statements of Cash Flows and recognized as debt due after one year in our Consolidated Statements of
Financial Position.
Under the receivables securitization facility, the Railroad sells most of its accounts receivable to Union
Pacific Receivables, Inc. (UPRI), a bankruptcy-remote subsidiary. UPRI may subsequently transfer,
without recourse on a 364-day revolving basis, an undivided interest in eligible accounts receivable to
investors. The total capacity to transfer undivided interests to investors under the facility was $600 million
at December 31, 2011 and 2010, respectively. The value of the outstanding undivided interest held by
investors under the facility was $100 million at both December 31, 2011 and 2010. The value of the
undivided interest held by investors was supported by $1.1 billion and $960 million of accounts receivable
at December 31, 2011 and 2010, respectively. At December 31, 2011 and 2010, the value of the interest
retained by UPRI was $1.1 billion and $960 million, respectively. This retained interest is included in
accounts receivable, net in our Consolidated Statements of Financial Position.
The value of the outstanding undivided interest held by investors could fluctuate based upon the
availability of eligible receivables and is directly affected by changing business volumes and credit risks,
including default and dilution. If default or dilution ratios increase one percent, the value of the
outstanding undivided interest held by investors would not change as of December 31, 2011. Should our
credit rating fall below investment grade, the value of the outstanding undivided interest held by investors
would be reduced, and, in certain cases, the investors would have the right to discontinue the facility.