Following is the debt footnote from the Lowe’s 2013 annual report (In millions)
2. Following is the debt footnote from the Lowe’s 2013 annual report (In millions):
(in millions) Debt Category | Interest Rates | Fiscal Year of Maturity | Balance January 30, 2014 | Balance February 1, 2013 | |
Secured debt:1 | |||||
Mortgage notes | 7.00 to 8.25% | 2018 | $ 27 | $ 33 | |
Unsecured debt: | |||||
Debentures | 6.50 to 6.88% | 2029 | 694 | 694 | |
Notes | 8.25% | 2010 | 500 | 499 | |
Medium-term notes - series A | 8.19 to 8.20% | 2023 | 15 | 20 | |
Medium-term notes - series B2 | 7.11 to 7.61% | 2037 | 217 | 217 | |
Senior notes | 5.00 to 6.65% | 2037 | 3,273 | 3,271 | |
Convertible notes | - | 511 | |||
Capital leases and other | 2030 | 347 | 371 | ||
Total long-term debt | 5,073 | 5,616 | |||
Less current maturities | 34 | 40 | |||
Long-term debt, excluding current maturities | $5,039 | $5,576 | |||
1 | Real properties with an aggregate book value of $35 million were pledged as collateral at January 30, 2014, for secured debt. | ||||
2 | Approximately 46% of these medium-term notes may be put at the option of the holder on the 20th anniversary of the issue at par value. The medium-term notes were issued in 1997. None of these notes are currently putable. |
Required:
a. What is the amount of long-term debt on Lowe’s balance sheet as of January 30, 2014?
b. What proportion of Lowe’s long-term debt is due before January 30, 2015?
c. How much of Lowe’s assets were pledged as collateral as of January 30, 2014?
d. What effect, if any, does Lowe’s collateral have on its debt rating and interest costs?
e. Assume that the Senior notes outstanding at the beginning of the year were 5.2% notes issued to yield 5.5%. At the beginning of the year, these notes had an unamortized discount of $12 million. What cash interest payment did Lowe’s make for these notes? What interest expense did Lowe’s record for these notes during the current year?
f. Explain in layman’s terms, the put feature on Lowe’s medium-term notes.
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Rating:
/5
Solution: Following is the debt footnote from the Lowe’s 2013 annual report (In millions)