NOTES PAYABLE AND OTHER BORROWINGS

12 Months Ended

May 31, 2012

Notes Payable and Other Borrowings [Abstract]

NOTES PAYABLE AND OTHER BORROWINGS

8. NOTES PAYABLE AND OTHER BORROWINGS

Notes payable and other borrowings consisted of the following:

(Dollars in millions)			May 31, 2012		May 31, 2011
Short-term borrowings		$	1,700	$	1,150
4.95% senior notes due April 2013			1,250		1,250
3.75% senior notes due July 2014, net of fair value adjustment of $69 each as of May 31, 2012 and 2011(1)			1,569		1,569
5.25% senior notes due January 2016, net of discount of $4 and $5 as of May 31, 2012 and 2011, respectively			1,996		1,995
5.75% senior notes due April 2018, net of discount of $1 each as of May 31, 2012 and 2011			2,499		2,499
5.00% senior notes due July 2019, net of discount of $5 each as of May 31, 2012 and 2011			1,745		1,745
3.875% senior notes due July 2020, net of discount of $2 each as of May 31, 2012 and 2011			998		998
6.50% senior notes due April 2038, net of discount of $2 each as of May 31, 2012 and 2011			1,248		1,248
6.125% senior notes due July 2039, net of discount of $8 each as of May 31, 2012 and 2011			1,242		1,242
5.375% senior notes due July 2040, net of discount of $24 and $25 as of May 31, 2012 and 2011, respectively			2,226		2,225
Capital leases			1		1
Total borrowings		$	16,474	$	15,922
Notes payable, current and other current borrowings		$	2,950	$	1,150
Notes payable, non-current and other non-current borrowings		$	13,524	$	14,772
(1)	Refer to Note 11 for a description of our accounting for fair value hedges.

Senior Notes and Other

In July 2010, we issued $3.25 billion of fixed rate senior notes comprised of $1.0 billion of 3.875% notes due July 2020 (2020 Notes) and $2.25 billion of 5.375% notes due July 2040 (2040 Notes, and together with the 2020 Notes, the Original Senior Notes). We issued the Original Senior Notes in order to repay indebtedness, including the repayment of $2.25 billion of 5.00% senior notes that matured and were repaid in January 2011, for general corporate purposes, for future acquisitions and in order to replenish cash used to repay $1.0 billion of floating rate senior notes that matured in May 2010. As part of the offering of the Original Senior Notes, we entered into a registration rights agreement with the initial purchasers for the benefit of the holders of the Original Senior Notes in which we agreed to file with the SEC a registration statement with respect to senior notes identical in all material respects to the Original Senior Notes within fourteen months after the issue date of the Original Senior Notes and on December 16, 2011 we completed a registered offer to exchange the Original Senior Notes for new freely tradable notes having terms substantially identical to the Original Senior Notes. An aggregate of $994 million principal amount of the 2020 Notes and an aggregate of $2.24 billion principal amount of the 2040 Notes were tendered and exchanged in the offer.

In July 2009, we issued $4.5 billion of fixed rate senior notes comprised of $1.5 billion of 3.75% notes due July 2014 (2014 Notes), $1.75 billion of 5.00% notes due July 2019 (2019 Notes) and $1.25 billion of 6.125% notes due July 2039 (2039 Notes). We issued these senior notes for general corporate purposes and for our acquisition of Sun and acquisition related expenses.

In April 2008, we issued $5.0 billion of fixed rate senior notes, of which $1.25 billion of 4.95% senior notes is due April 2013 (2013 Notes), $2.5 billion of 5.75% senior notes is due April 2018 (2018 Notes) and $1.25 billion of 6.50% senior notes is due April 2038 (2038 Notes). We issued these senior notes for general corporate purposes and for acquisitions and acquisition related expenses.

In May 2007, we issued $2.0 billion of floating rate senior notes, of which $1.0 billion was due and paid in May 2009 and $1.0 billion was due and paid in May 2010. We had also entered into certain variable to fixed interest rate swap agreements related to these senior notes, which settled as of the same dates the notes were repaid (see Note 11).

In January 2006, we issued $5.75 billion of senior notes, of which $2.25 billion of 5.00% senior notes was due and paid in January 2011 and $2.0 billion of 5.25% senior notes due 2016 (2016 Notes) remained outstanding as of May 31, 2012.

The effective interest yields of the 2013 Notes, 2014 Notes, 2016 Notes, 2018 Notes, 2019 Notes, 2020 Notes, 2038 Notes, 2039 Notes and 2040 Notes (collectively, the Senior Notes) at May 31, 2012 were 4.96%, 3.75%, 5.32%, 5.76%, 5.05%, 3.90%, 6.52%, 6.19% and 5.45%, respectively. Interest is payable semi-annually for the Senior Notes. In September 2009, we entered into interest rate swap agreements that have the economic effect of modifying the fixed interest obligations associated with the 2014 Notes so that the interest payable on these notes effectively became variable (1.39% at May 31, 2012; see Note 11 for additional information). All of the Senior Notes may be redeemed at any time, subject to payment of make-whole premiums for each series.

The Original Senior Notes and Senior Notes rank pari passu with any other notes we may issue in the future pursuant to our commercial paper program (see additional discussion regarding our commercial paper program below) and all existing and future senior indebtedness of Oracle Corporation. All existing and future liabilities of the subsidiaries of Oracle Corporation are effectively senior to the Original Senior Notes, Senior Notes and any of our commercial paper notes.

In the third quarter of fiscal 2012, shortly after the closing of our acquisition of RightNow, we repaid, in full, $255 million of RightNow’s legacy convertible notes.

In the third quarter of fiscal 2010, shortly after the closing of our acquisition of Sun we repaid, in full, $700 million of Sun’s legacy convertible notes.

Future principal payments for all of our borrowings at May 31, 2012 were as follows (in millions):

Fiscal 2013	$	2,950
Fiscal 2014		—
Fiscal 2015		1,500
Fiscal 2016		2,000
Fiscal 2017		—
Thereafter		10,000
Total	$	16,450

Commercial Paper Program & Commercial Paper Notes

We entered into a commercial paper program in February 2006 (amended in May 2008) via dealer agreements with Banc of America Securities LLC and JP Morgan Securities, Inc. and an Issuing and Paying Agency Agreement entered into in February 2006 with JPMorgan Chase Bank, National Association (CP Program). On May 11, 2010, we reduced the overall capacity of our CP Program from $5.0 billion to $3.0 billion. Our ability to issue commercial paper notes in the future is highly dependent upon our ability to provide a “back-stop” by means of a revolving credit facility or other debt facility for amounts equal to or greater than the amounts of commercial paper notes we intend to issue. While presently we have no such facilities in place that may provide a back-stop to such commercial paper notes (see additional discussion under “Revolving Credit Agreements” below), we currently believe that, if needed, we could put in place one or more additional revolving credit facilities or other debt facility in a timely manner and on commercially reasonable terms.

During fiscal 2010, we issued $2.8 billion of unsecured short-term commercial paper notes pursuant to the CP Program (none issued in fiscal 2012 and 2011). As of May 31, 2012 and 2011, we had no commercial paper notes outstanding.

Revolving Credit Agreements

On May 29, 2012, we borrowed $1.7 billion pursuant to a revolving credit agreement with JPMorgan Chase Bank, N.A., as initial lender and administrative agent; and J.P. Morgan Securities, LLC, as sole lead arranger and sole bookrunner (the 2012 Credit Agreement). Interest for the 2012 Credit Agreement is based on either (x) a “base rate” calculated as the highest of (i) JPMorgan’s prime rate, (ii) the federal funds effective rate plus 0.50% and (iii) the LIBOR for deposits in U.S. Dollars plus 1%, or (y) LIBOR for deposits made in U.S. Dollars plus 0.35%, depending on the type of borrowings made by us. The effective interest rate of our borrowing under the 2012 Credit Agreement is 0.24% at May 31, 2012. This borrowing is due on July 2, 2012, which is the termination date of the 2012 Credit Agreement.

The 2012 Credit Agreement contains certain customary representations, warranties and guarantees, and a capitalization covenant. Events of default result in the requirement to pay additional interest. If any of the events of default occur and are not cured, any unpaid amounts under the 2012 Credit Agreement may be declared immediately due and payable and the 2012 Credit Agreement may be terminated. We were in compliance with the 2012 Credit Agreement’s covenants as of May 31, 2012.

On May 27, 2011, we entered into two revolving credit agreements with BNP Paribas, as initial lender and administrative agent, and BNP Paribas Securities Corp., as sole lead arranger and sole bookrunner (the 2011 Credit Agreements), and borrowed $1.15 billion pursuant to these agreements. During fiscal 2012, we repaid the $1.15 billion and the 2011 Credit Agreements expired pursuant to their terms.