Notes to the Financial Statements
Note 5 — Debt and related interest
Borrowing Limits and Debt
Under the Postal Reorganization Act, as amended by Public Laws 101-227 and 109-435, we can issue and sell debt obligations. However, at year-end we are limited to net annual increases of $3 billion in our debt. Our total debt cannot exceed $15 billion.
Debt consists of the following:
Interest Rate % |
Terms * |
2008 |
2007 |
|---|---|---|---|
(Dollars in millions) |
|||
0.297%** |
Short-term revolving credit facility; Payable October 1, 2008 and 2007 |
$ 2,200 |
$ 2,900 |
0.905% |
Payable December 11, 2008 |
2,500 |
— |
0.485% |
Payable December 18, 2008 |
2,000 |
— |
0.155% |
Short-term revolving credit facility; Payable |
500 |
— |
3.528% |
Overnight revolving credit note; Payable October 1, 2007 |
— |
300 |
3.101% |
Payable November 15, 2007 |
— |
500 |
3.866% |
Payable December 20, 2007 |
— |
500 |
|
$ 7,200 |
$ 4,200 |
|
* All debt is repurchasable at any time at a price determined by the Secretary of the Treasury, based on rates prevailing in the Treasury Security market at the time of repricing. |
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The current value of our debt is what it would cost to pay off the debt if we used the current yield on equivalent U.S. Treasury notes. At year-end, the current estimated value of our debt is $7.2 billion.
Note Purchase Agreements
Our note purchase agreements with the Federal Financing Bank provide for revolving credit lines of $4 billion. These credit lines enable us to draw up to $3.4 billion with two days’ notice, and up to $600 million on the same business day the funds are needed. Under these agreements we can also use a series of other notes with varying provisions to draw upon with two days’ notice. The notes provide us the flexibility to borrow short-term or long-term, using fixed or floating-rate debt, and can be either callable or non-callable.
Interest Payments on Retirement
There were no cash outlays for interest on the retirement “supplemental liability” in 2008 or 2007 because the enactment of P.L. 109-435 suspended this requirement until 2017. In 2006, the cash outlay was $231 million. See Note 10, Retirement programs, in the Notes to the Financial Statements for additional information.
Other Interest Payments
Cash outlays for other interest were $37 million in 2008, $9 million in 2007, and $4 million in 2006.
Note 6 — Property and equipment
Sale of Major Facility
In 2008 and 2006, there were no sales of any major facilities. On March 30, 2007, we sold the James A. Farley building in New York City to the Empire State Development Corporation (ESDC), for $190 million and additional proceeds of up to $55 million, contingent upon the achievement of certain development and leasing criteria by the developer of the property. The Postal Service continues to conduct retail and carrier operations at this facility under the terms of an interim lease with annual rentals of $5.6 million per year. Once the carrier operations are relocated to other facilities, we will continue to conduct retail and some administrative functions in a smaller portion of the building under a 99-year lease, with a rental fee of $1. The Postal Service has an option to require the building owner to change the legal structure of the building ownership into condominium units, with the Postal Service being given the right to purchase the space subject to the 99-year lease.
We accounted for the transaction under the deposit method under the provisions of FAS 66, Accounting for Sales of Real Estate. The gain will not be recognized and the asset will not be removed from our accounting records until the lease and other continuing involvement in the building have expired.
In conjunction with this sale, from the funds ESDC paid us, $10 million was set aside for an environmental clean-up fund. Our environmental liability is limited to $10 million and is included on our balance sheet under trade payables and other accrued expenses.
Impaired Assets
The amount of assets that was written down due to impairment in accordance with FAS 144 was immaterial to the balances of fixed assets in 2008 and 2007.