Debt

The carrying value of debt is composed of the following as of the dates indicated (in millions):



		December 31,
Description	Maturity Date	2012			2011
Credit facility	August 22, 2016	$	134.0		$	60.0
7.625% senior notes	February 1, 2017	150.0			150.0
New 4.0% Notes, $105.3 million principal amount	June 15, 2014	100.9			98.2
New 4.25% Notes, $97.0 million principal amount	December 15, 2014	92.1			89.9
Original 4.0% Notes	June 15, 2014	9.7			9.7
Original 4.25% Notes	December 15, 2014	3.0			3.0
Capital lease obligations, weighted average interest rate of 2.9%	In installments through June 2019	79.0			40.6
Notes payable for equipment, weighted average interest rate of 4.0%	In installments through May 2018	30.2			43.4
Total debt		$	598.9		$	494.8
Less current maturities		(52.6		)	(34.1		)
Long-term debt		$	546.3		$	460.7

Credit Facility

In August 2011, the Company entered into an amendment to its previous credit facility, which amended and restated the Company’s previous credit facility in its entirety, expanded maximum available borrowing capacity from $260 million to $600 million and extended the maturity date from May 2013 until August 2016. The amended Credit Facility allows the Company to borrow up to the full $600 million of availability, provided that the Company is in compliance with all of the terms and provisions of the Credit Facility.

The Credit Facility provides for a $600 million senior secured revolving credit facility maturing on August 22, 2016. Up to $350 million of the Credit Facility is available for the issuance of letters of credit. Subject to certain terms in the Credit Facility, the Company has the option to increase its revolving commitments and/or establish term loans of up to $200 million in total. Borrowings under the Credit Facility will be used to refinance existing indebtedness and for working capital, capital expenditures and other corporate purposes, including the repurchase or prepayment of indebtedness; however, the Credit Facility restricts the repurchase or prepayment of certain unsecured indebtedness, including the Company’s senior notes due 2017 and senior convertible notes due 2014, unless the Company has at least $50 million of remaining liquidity (as defined in the Credit Facility) after any such repurchase or prepayment.

The Credit Facility requires that the Company maintain a consolidated leverage ratio (as defined in the Credit Facility) at or below 3.50 to 1.00 and a consolidated interest coverage ratio (as defined in the Credit Facility) at or above 3.00 to 1.00. Subject to customary exceptions, the Credit Facility also limits the Company’s ability to engage in certain activities, including acquisitions, mergers and consolidations, debt incurrence, investments, capital expenditures, asset sales, debt prepayments, lien incurrence and the making of distributions on or repurchases of capital stock.

Amounts borrowed under the Credit Facility will bear interest, at the Company’s option, at a rate equal to either (a) the eurocurrency rate (as defined in the Credit Facility), plus a margin of 1.50% to 2.50%, as determined based on the Company’s consolidated leverage ratio (as defined in the Credit Facility) as of the most recent fiscal quarter, or (b) the base rate, which is equal to the highest of (i) the federal funds rate (as defined in the Credit Facility) plus 0.5%, (ii) Bank of America’s prime rate and (iii) the eurocurrency rate plus 1.00%, plus a margin of 0.50% to 1.50%, as determined based on the Company’s consolidated leverage ratio as of the most recent fiscal quarter. Financial standby letters of credit and commercial letters of credit issued under the Credit Facility are subject to a letter of credit fee of 1.50% to 2.50% and performance standby letters of credit are subject to a letter of credit fee of 0.75% to 1.25% in each case, based on the Company’s consolidated leverage ratio as of the most recent fiscal quarter. The Company must also pay a commitment fee to the lenders on any unused availability under the Credit Facility, which is equal to 0.25% to 0.45%, based on the Company’s consolidated leverage ratio as of the then most recent fiscal quarter.

As of December 31, 2012, the Company had outstanding revolving loans of $134.0 million and approximately $120.8 million of letters of credit issued under the Credit Facility. The remaining $345.2 million of Credit Facility borrowing capacity as of December 31, 2012 was available for revolving loans or up to $229.2 million of new letters of credit. As of December 31, 2011, the Company had outstanding revolving loans of $60.0 million and approximately $90.0 million of letters of credit issued under the Credit Facility. Outstanding letters of credit mature at various dates and most have automatic renewal provisions, subject to prior notice of cancellation. As of December 31, 2012 and 2011, interest on outstanding revolving loans accrued at a rate of approximately 3.95% and 2.94% per annum, respectively. As of both December 31, 2012 and 2011, interest on outstanding letters of credit accrued at either 1% or 2% per annum, based on the type of letter of credit issued, as described above. The unused facility fee as of both December 31, 2012 and 2011 was 0.35%.

The Credit Facility is guaranteed by certain of the Company’s 100%-owned direct and indirect domestic subsidiaries. It is collateralized by a first priority security interest in substantially all of the Company’s assets and the assets of its wholly-owned subsidiaries, as well as a pledge of the outstanding equity interests in certain of the Company’s operating subsidiaries. The Credit Facility also provides for customary events of default and contains cross-default provisions with the Company’s other significant debt instruments, including the Company’s indemnity agreement with its surety provider, as well as customary remedies upon an event of default (as defined in the Credit Facility), including the acceleration of repayment of outstanding amounts and other remedies with respect to the collateral securing the Credit Facility obligations.

Senior Convertible Notes

New Senior Convertible Notes. During the first quarter of 2011, the Company exchanged $105.3 million of its Original 4.0% Notes and $97.0 million of its Original 4.25% Notes for identical principal amounts of New 4.0% Notes and New 4.25% Notes, respectively, for an exchange fee of approximately 50 basis points, or 0.5%, of the aggregate principal amount of the notes exchanged. The terms of the New Convertible Notes are substantially identical to those of the Original Convertible Notes, except that the New Convertible Notes have an optional physical (share), cash or combination settlement feature and contain certain conditional conversion features. Exchange fees of approximately $1.0 million will be recognized over the remaining life of the New Convertible Notes as interest expense. Transaction costs of approximately $0.7 million were recognized within general and administrative expenses beginning in 2010 through March 31, 2011. During 2011, an immaterial principal amount of Original Convertible Notes was converted into shares of the Company’s common stock.

The New Convertible Notes are convertible at any time during the three months immediately preceding their respective maturity dates; prior to such time, however, the New Convertible Notes are convertible only if one of the following three conditions is satisfied:

(i)

if the last reported sale price of the Company’s common stock is greater than or equal to 130% of the applicable conversion price of the New Convertible Notes during at least 20 of the last 30 consecutive trading days ending on and including the last trading day of a calendar quarter, then the applicable New Convertible Notes may be converted during the immediately following calendar quarter (and only during such calendar quarter);

(ii)

if after any five consecutive trading-day period in which the trading price per $1,000 principal amount of New Convertible Notes for each trading day during such period was less than 98% of the product of the last reported sale price of the Company’s common stock and the applicable conversion rate, then the applicable New Convertible Notes may be converted during the immediately following five business day period; or

(iii)

if the Company effects certain distributions to its shareholders or if the Company is party to a consolidation, merger, binding share exchange, or a sale, transfer, lease or other conveyance of all or substantially all of its assets, pursuant to which the Company’s common stock would be converted into or exchanged for, or would constitute solely the right to receive, cash, securities or other assets, or in the case of certain other fundamental changes, then the New Convertible Notes may be converted during the period that is 45 trading days prior to the ex-dividend date or the initial anticipated effective date of the transaction, as applicable.

The Company has divided the principal balance of the New Convertible Notes between the fair value of the debt component and the fair value of the common stock conversion feature. Using an income approach, management discounted the values of the New Convertible Notes at an estimated rate of 6.73%, which represents the estimated market interest rate for a similar nonconvertible instrument as of the date of the exchange. The resulting total debt discount of $17.4 million for the New Convertible Notes will be accreted to interest expense over the remaining terms of the New Convertible Notes. This will increase interest expense during the term of the New Convertible Notes above their 4.0% and 4.25% cash coupon interest rates to an effective interest rate of 6.73%. As of December 31, 2012, the remaining period of amortization associated with the debt discount and related financing costs was approximately 2 years. The fair value of the common stock conversion feature is recorded as a component of shareholders’ equity.

The carrying values of the debt and equity components of the New Notes as of the dates indicated are as follows (in millions):



	December 31, 2012						December 31, 2011
	New 4.0% Senior Convertible Notes			New 4.25% Senior Convertible Notes			New 4.0% Senior Convertible Notes			New 4.25% Senior Convertible Notes
Principal amount	$	105.3		$	97.0		$	105.3		$	97.0
Unamortized debt discount and financing costs	(4.4		)	(4.9		)	(7.1		)	(7.1		)
Net carrying amount of debt component	$	100.9		$	92.1		$	98.2		$	89.9
Carrying amount of equity component	$	8.9		$	8.5		$	8.9		$	8.5

The New Convertible Notes are guaranteed by the Company’s subsidiaries that guarantee the Original Convertible Notes.

Original Senior Convertible Notes. In November 2009, the Company issued $100 million of Original 4.25% Notes due December 15, 2014 in a private placement. Of this amount, $97.0 million was canceled and exchanged in the first quarter of 2011 for a like principal amount of New 4.25% Notes in connection with our debt exchange as discussed above. The Original 4.25% Notes bear interest at a rate of 4.25% per year, payable semi-annually in arrears, on June 15 and December 15 of each year. On or prior to December 12, 2014, holders may convert their Original 4.25% Notes into shares of MasTec common stock at an initial conversion rate of 64.6162 shares of MasTec common stock per $1,000 principal amount of Original 4.25% Notes, which represents an initial conversion price of approximately $15.48 per share, subject to customary anti-dilution adjustment terms for these types of notes. Approximately $3.7 million in financing costs were incurred in connection with the issuance of the Original 4.25% Notes. These deferred financing costs are included in other assets in the consolidated balance sheet and are being amortized over the term of the Original 4.25% Notes.

In June 2009, the Company issued $115 million of Original 4.0% Notes due June 15, 2014 in a registered offering. Of this amount, $105.3 million was canceled and exchanged in the first quarter of 2011 for a like principal amount of New 4.0% Notes in connection with our debt exchange as discussed above. The Original 4.0% Notes bear interest at a rate of 4.0% per year, payable semi-annually in arrears, on June 15 and December 15 of each year. On or prior to June 13, 2014, holders may convert their Original 4.0% Notes into shares of MasTec common stock at an initial conversion rate of 63.4417 shares of MasTec common stock per $1,000 principal amount of Original 4.0% Notes, which represents an initial conversion price of approximately $15.76 per share, subject to customary anti-dilution adjustment terms for these types of notes. Approximately $5.4 million in financing costs were incurred in connection with the issuance of the Original 4.0% Notes, which are included in other assets in the consolidated balance sheet and are being amortized over the term of the Original 4.0% Notes.

The 4.25% and 4.0% senior convertible notes are guaranteed by certain of the Company's 100%-owned direct and indirect domestic operating subsidiaries. There are no financial covenants on these notes, however, there are certain nonfinancial provisions and covenants associated with these notes.

As of December 31, 2012, an aggregate principal amount of $12.7 million of Original Convertible Notes was outstanding.

Senior Notes

The Company has $150 million of outstanding 7.625% senior notes due February 2017, with interest due semi-annually. The Senior Notes contain default (including cross-default) provisions and covenants restricting many of the same transactions as under the Company’s Credit Facility. The indenture that governs the Senior Notes allows the Company to incur additional indebtedness to the extent that the Company’s fixed charge coverage ratio, as therein defined, is at least 2:1. The fixed charge coverage ratio is calculated as consolidated EBITDA for the most recent four fiscal quarters for which internal financial statements are available, divided by fixed charges for such four quarter period, as such terms are defined in the indenture. If the fixed charge coverage ratio is less than 2:1, the Company is still permitted to incur the following additional indebtedness, among others: credit facilities under a defined threshold, renewals to existing debt permitted under the indenture, capital lease obligations up to 5% of the Company’s consolidated net assets, plus an additional $50 million of indebtedness at any time the Senior Notes remain outstanding. The Senior Notes are guaranteed by certain of the Company’s operating subsidiaries.

Acquisition Debt

In connection with certain acquisitions, the Company has entered into or assumed certain debt and/or capital lease obligations. As of December 31, 2012 and 2011, $20.6 million and $29.9 million, respectively, of this acquisition-related debt remained outstanding. Except for one note with an immaterial principal balance as of December 31, 2012, there are no financial covenants associated with this acquisition-related debt.

Debt Guarantees and Covenants

The Company’s Senior Notes, New Convertible Notes and Original Convertible Notes are fully and unconditionally guaranteed on an unsecured, unsubordinated, joint and several basis by certain of the Company's existing and future 100%-owned direct and indirect domestic subsidiaries that are guarantors of the Company's Credit Facility or other outstanding indebtedness. See supplemental financial information in Note 21 - Supplemental Guarantor Financial Information.

MasTec was in compliance with all provisions and covenants pertaining to its outstanding debt instruments as of December 31, 2012 and 2011.

Contractual Maturities of Debt Obligations

Contractual maturities of MasTec’s debt and capital lease obligations as of December 31, 2012 were as follows (in millions):



2013	$	52.6
2014	233.9
2015	18.4
2016	141.6
2017	152.0
Thereafter	0.4
Total	$	598.9

See Note 11 – Lease Obligations for additional information.

Interest Expense, Net

Details of interest expense, net, classified within continuing operations for the periods indicated is as follows (in millions):



	Year Ended December 31,
	2012			2011			2010
Interest expense:
Contractual and other interest expense	$	27.5		$	26.1		$	26.6
Accretion of senior convertible note discount	4.9			4.2			—
Deferred financing costs and commitment fees	5.4			4.7			3.6
Total interest expense	$	37.8		$	35.0		$	30.2
Interest income	(0.4		)	(0.5		)	(1.0		)
Interest expense, net	$	37.4		$	34.5		$	29.2