Union Pacific 2012 Annual Report Download - page 38

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Debt Exchange – On June 23, 2011, we exchanged $857 million of various outstanding notes and
debentures due between 2013 and 2019 (Existing Notes) for $750 million of 4.163% notes (New Notes)
due July 15, 2022, plus cash consideration of approximately $267 million and $17 million for accrued and
unpaid interest on the Existing Notes. In accordance with the Accounting Standards Codification (ASC)
470-50-40, Debt-Modifications and Extinguishments-Derecognition, this transaction was accounted for as
a debt exchange, as the exchanged debt instruments are not considered to be substantially different.
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. No gain or loss was recognized as a result of the
exchange. Costs related to the debt exchange that were payable to parties other than the debt holders
totaled approximately $6 million and were included in interest expense during the three months ended
June 30, 2011.
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
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Debt Redemptions – On November 30, 2012, we redeemed all $450 million of our outstanding 5.45%
notes due January 31, 2013. The redemption resulted in an early extinguishment charge of $4 million.
On April 28, 2012, we redeemed all $100 million of our outstanding 5.70% Tooele County, Utah
Hazardous Waste Treatment Revenue Bonds due November 1, 2026. The redemption resulted in an
early extinguishment charge of $2 million in the second quarter of 2012.
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.
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Receivables Securitization Facility – Under the receivables securitization facility, the Railroad sells
most of its accounts receivable to Union Pacific Receivables, Inc. (UPRI), a wholly-owned, 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, 2012 and 2011, respectively.
The value of the outstanding undivided interest held by investors under the facility was $100 million at
both December 31, 2012 and 2011. The value of the undivided interest held by investors was supported
by $1.1 billion of accounts receivable at both December 31, 2012 and 2011. At both December 31, 2012
and 2011, the value of the interest retained by UPRI was $1.1 billion. 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, 2012. Should our