Visa 2007 Annual Report Download - page 140

Table of Contents
VISA U.S.A. INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 14—Debt
The Company had outstanding debt as follows:
At September 30
2007 2006
(in thousands)
4.64% Senior secured notes—Series A principal and interest payments payable quarterly, due 12/2007 $ 6,600 $ 33,000
5.60% Senior secured notes—Series B principal and interest payments payable quarterly, due 12/2012 35,700 42,500
Unamortized debt issuance costs (1,020) (1,881)
Total debt $ 41,280 $ 73,619
In December 2002, the Company issued $200 million in Senior Secured Notes with maturity dates of five and ten years. The notes are collateralized by
the Company's Colorado facility, which consists of two data centers and an office building, in addition to processing assets and developed software. These
assets are included in facilities, equipment and software, net on the Company's consolidated balance sheets and have net carrying values of $132.3 million and
$147.7 million, respectively, at September 30, 2007 and 2006.
In May 2004, the Company executed the First Amendment and Waiver to the Note Purchase Agreement (First Amendment) associated with these
Senior Secured Notes. Under terms of the amendment, interest rates increased and a letter of credit was added to existing collateral. Interest rates increased
from 4.64% to 5.39% on Series A Notes and from 5.60% to 6.35% on Series B Notes.
During the second quarter of fiscal 2006, certain financial covenant requirements under the First Amendment were met. As a result, at April 1, 2006 the
interest rates on these Notes decreased from 5.39% to 4.64% on Series A Notes and from 6.35% to 5.60% on Series B Notes. In addition, the Company is no
longer obligated to retain a letter of credit required under the First Amendment (Note 13— Restricted Assets and Liabilities). Certain other financial covenant
requirements associated with net income, liquidity and sales are also no longer required.
The Senior Secured Series A and Series B Notes were classified as current on the Company's consolidated balance sheets at September 30, 2007
because the Company was in default of certain financial performance covenants as a result of the American Express litigation settlement described in Note 20
—Legal Matters. The Company is currently pursuing waivers of these covenants with its lenders. To the extent these are not available on acceptable terms, the
Company has sufficient liquidity to pay off the debt.
The fair value of the Company's debt is estimated based on the quoted market prices for similar issues. The estimated fair value of the Company's debt
at September 30, 2007 and 2006, after deduction of unamortized issuance costs, was $41.7 million and $73.7 million, respectively, which differs from the
carrying amounts, after deduction of unamortized issuance costs, of $41.3 million and $73.6 million, respectively, included in the Company's consolidated
balance sheets.
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