Notes to Consolidated Financial Statements

NOTE 9

DEBT

Debt Maturing Within One Year

Debt maturing within one year is as follows:

(dollars in millions)

At December 31,

2009

 

2008

 

Long-term debt maturing within one year

$

6,105

 

$

3,506

 

Commercial paper

 

1,100

 

 

1,487

 

Total debt maturing within one year

$

7,205

 

$

4,993

 

The weighted average interest rate for our commercial paper at December 31, 2009 and December 31, 2008 was 0.7% and 2.9%, respectively.

Capital expenditures (primarily acquisition and construction of network assets) are partially financed pending long-term financing through bank loans and the issuance of commercial paper payable within 12 months.

On April 15, 2009, we terminated all commitments under our previous $6.0 billion three-year credit facility with a syndicate of lenders that was scheduled to mature in September 2009 and entered into a new $5.3 billion 364-day credit facility with a group of major financial institutions. As of December 31, 2009, the unused borrowing capacity under the 364-day credit facility was approximately $5.2 billion. A commitment fee accrues on the unused portion of the credit facility.

Long-Term Debt

Outstanding long-term debt obligations are as follows:

(dollars in millions)

At December 31,

Interest Rates %

Maturities

2009

 

2008

 

Verizon Wireless – notes payable and other

3.75 – 5.55

2011 – 2014

$

7,000

 

$

 

 

7.38 – 8.89

2011 – 2018

 

6,118

 

 

5,983

 

 

Floating

2011

 

6,246

 

 

4,440

 

Verizon Wireless – Alltel assumed notes

6.50 – 7.88

2012 – 2032

 

2,334

 

 

 

 

Verizon Communications – notes payable and other

4.35 – 5.50

2010 – 2018

 

6,196

 

 

7,878

 

 

5.55 – 6.90

2012 – 2038

 

10,386

 

 

8,741

 

 

7.25 – 8.95

2010 – 2039

 

9,671

 

 

8,822

 

 

Telephone subsidiaries – debentures

4.63 – 7.00

2010 – 2033

 

8,797

 

 

9,654

 

 

7.15 – 7.88

2012 – 2032

 

1,449

 

 

1,449

 

 

8.00 – 8.75

2010 – 2031

 

1,080

 

 

1,080

 

 

Other subsidiaries – debentures and other

6.84 – 8.75

2018 – 2028

 

1,700

 

 

2,200

 

 

Employee stock ownership plan loans –

NYNEX debentures

9.55

2010

 

23

 

 

47

 

 

 

 

 

 

 

 

 

 

Capital lease obligations

(average rates of 6.3% and 6.2%, respectively)

 

 

 

397

 

 

390

 

Unamortized discount, net of premium

 

 

 

(241

)

 

(219

)

Total long-term debt, including current maturities

 

 

 

61,156

 

 

50,465

 

Less long-term debt maturing within one year

 

 

 

6,105

 

 

3,506

 

Total long-term debt

 

 

$

55,051

 

$

46,959

 

Verizon Wireless – Notes Payable and Other

Verizon Wireless Capital LLC, a wholly owned subsidiary of Verizon Wireless, is a limited liability company formed under the laws of Delaware on December 7, 2001 as a special purpose finance subsidiary to facilitate the offering of debt securities of Verizon Wireless by acting as co-issuer. Other than the financing activities as a co-issuer of Verizon Wireless indebtedness, Verizon Wireless Capital LLC has no material assets, operations or revenues. Verizon Wireless is jointly and severally liable with Verizon Wireless Capital LLC for co-issued notes, as indicated below.

2009

During November 2009, Verizon Wireless and Verizon Wireless Capital LLC completed an exchange offer to exchange privately placed notes issued in November 2008, as well as in February and May 2009 for new notes with similar terms.

In June 2009, Verizon Wireless issued $1.0 billion aggregate principal amount of floating rate notes due 2011. Commencing on December 27, 2009 and on each quarterly interest payment date thereafter, both the noteholders and Verizon Wireless have the right to require settlement of all or a portion of these notes at par. Accordingly, the notes are classified as current maturities in the consolidated balance sheet. As of December 31, 2009, neither Verizon Wireless nor the noteholders have exercised their right to require settlement on any portion of these notes.

In May 2009, Verizon Wireless and Verizon Wireless Capital LLC co-issued $4.0 billion aggregate principal amount of two-year fixed and floating rate notes in a private placement resulting in cash proceeds of approximately $4.0 billion, net of discounts and issuance costs. In February 2009, Verizon Wireless and Verizon Wireless Capital LLC co-issued $4.3 billion aggregate principal amount of three and five-year fixed rate notes in a private placement resulting in cash proceeds of $4.2 billion, net of discounts and issuance costs.

2008

In December 2008, Verizon Wireless and Verizon Wireless Capital LLC, as the borrowers, entered into a $17.0 billion credit facility (Bridge Facility). On January 9, 2009, Verizon Wireless borrowed $12.4 billion under the Bridge Facility in order to complete the acquisition of Alltel and repay certain of Alltel’s outstanding debt. Verizon Wireless used cash generated from operations and the net proceeds from the sale of the notes in private placements issued in February 2009, May 2009 and June 2009, which are described above, to repay all of the borrowings under the Bridge Facility. No borrowings were outstanding under the Bridge Facility at December 31, 2009 and the commitments under the Bridge Facility were terminated.

In December 2008, Verizon Wireless and Verizon Wireless Capital LLC, co-issued €650 million of 7.625% notes due 2011, €500 million of 8.750% notes due 2015 and £600 million of 8.875% notes due 2018. Concurrent with these offerings, Verizon Wireless entered into cross currency swaps to fix our future interest and principal payments in U.S. dollars as well as to exchange the net proceeds from British Pounds Sterling and Euros into U.S. dollars (see Note 10). The net proceeds of $2.4 billion, net of discounts and issuance costs were used in connection with the Alltel acquisition.

In November 2008, Verizon Wireless and Verizon Wireless Capital LLC co-issued a private placement of $1.3 billion of 7.375% notes due 2013 and $2.3 billion of 8.500% notes due 2018 resulting in cash proceeds of $3.5 billion net of discounts and issuance costs. The net proceeds from the sale of these notes were used in connection with the Alltel acquisition on January 9, 2009 (see Note 2).

On September 30, 2008, Verizon Wireless and Verizon Wireless Capital LLC entered into a $4.4 billion Three-Year Term Loan Facility Agreement (Three-Year Term Facility) with a maturity date of September 30, 2011. Verizon Wireless borrowed $4.4 billion under the Three-Year Term Facility in order to repay a portion of the 364-Day Credit Agreement as described below. Borrowings under the Three-Year Term Facility currently bear interest at a variable rate based on LIBOR plus 100 basis points. During 2009, the first principal payment was made to reduce the outstanding balance as of December 31, 2009 to $4 billion. The Three-Year Term Facility includes a requirement to maintain a certain leverage ratio.

On June 5, 2008, Verizon Wireless entered into a $7.6 billion 364-Day Credit Agreement. During 2008, Verizon Wireless utilized this facility primarily to purchase Alltel debt obligations and pay fees and expenses incurred in connection therewith, finance the acquisition of Rural Cellular and repay the outstanding Rural Cellular debt and pay fees and expenses incurred in connection therewith. During 2008, the borrowings under the 364-Day Credit Agreement were repaid.

Verizon Communications – Notes Payable and Other

2009

During 2009, Verizon issued $1.8 billion of 6.35% notes due 2019 and $1.0 billion of 7.35% notes due 2039, resulting in cash proceeds of $2.7 billion, net of discounts and issuance costs, which was used to reduce our commercial paper borrowings, repay maturing debt and for general corporate purposes. In January 2009, Verizon utilized a $0.2 billion floating rate vendor financing facility due 2010. During 2009, $0.5 billion of floating rate notes due 2009 and $0.1 billion of 8.23% notes matured and were repaid.

2008

In November 2008, Verizon issued $2.0 billion of 8.75% notes due 2018 and $1.3 billion of 8.95% notes due 2039, which resulted in cash proceeds of $3.2 billion net of discount and issuance costs. In April 2008, Verizon issued $1.3 billion of 5.25% notes due 2013, $1.5 billion of 6.10% notes due 2018, and $1.3 billion of 6.90% notes due 2038, resulting in cash proceeds of $4.0 billion, net of discounts and issuance costs. In February 2008, Verizon issued $0.8 billion of 4.35% notes due 2013, $1.5 billion of 5.50% notes due 2018, and $1.8 billion of 6.40% notes due 2038, resulting in cash proceeds of $4.0 billion, net of discounts and issuance costs. In January 2008, Verizon utilized a $0.2 billion fixed rate vendor financing facility due 2010. During the first quarter of 2008, $1.0 billion of Verizon Communications Inc. 4.0% notes matured and were repaid.

Telephone and Other Subsidiary Debt

During 2009, we redeemed $0.1 billion of 6.8% Verizon New Jersey Inc. debentures, $0.3 billion of 6.7% notes and $0.2 billion of 5.5% Verizon California Inc. notes and $0.2 billion of 5.875% Verizon New England Inc. notes. In April 2009, we redeemed $0.5 billion of 7.51% GTE Corporation notes.

During 2008, we redeemed $0.2 billion of 5.55% Verizon Northwest notes, $0.3 billion of 6.9% and $0.3 billion of 5.65% Verizon North Inc. notes, $0.1 billion of 7.0% Verizon California Inc. notes, $0.3 billion of 6.0% Verizon New York Inc. notes, $0.3 billion of 6.46% GTE Corporation notes and $0.1 billion of 6.0% Verizon South Inc. notes.

Guarantees

We guarantee the debt obligations of GTE Corporation (but not the debt of its subsidiary or affiliate companies) that were issued and outstanding prior to July 1, 2003. As of December 31, 2009, $1.7 billion principal amount of these obligations remained outstanding.

Debt Covenants

We and our consolidated subsidiaries are in compliance with all of our debt covenants.

Maturities of Long-Term Debt

Maturities of long-term debt outstanding at December 31, 2009 are as follows:

Years

(dollars in millions)

2010

 

$

6,105

2011

 

 

9,646

2012

 

 

5,884

2013

 

 

5,857

2014

 

 

3,524

Thereafter

 

 

30,140