Debt and Credit Arrangements (Notes)

3 Months Ended

Mar. 31, 2013

Debt and Credit Arrangements [Abstract]

Long-Term Debt

A summary of the carrying amounts and fair values of our long-term debt is listed below.



	Effective Interest Rate	March 31, 2013				December 31, 2012
	Effective Interest Rate	Book Value		Fair Value ¹		Book Value		Fair Value ¹
6.25% Senior Unsecured Notes due 2014 (less unamortized discount of $0.2)	6.29%	$	352.4	$	376.8	$	352.8	$	372.6
10.00% Senior Unsecured Notes due 2017 (less unamortized discount of $7.7)	10.38%	592.3		642.8		591.9		660.8
2.25% Senior Notes due 2017 (less unamortized discount of $0.7)	2.30%	299.3		299.0		299.3		297.8
4.00% Senior Notes due 2022 (less unamortized discount of $2.8)	4.13%	247.2		252.4		247.1		258.7
3.75% Senior Notes due 2023 (less unamortized discount of $1.5)	4.32%	498.5		482.9		498.5		499.7
4.75% Convertible Senior Notes due 2023		0.0		0.0		200.5		202.8
Other notes payable and capitalized leases		83.8		83.9		87.3		90.8
Total long-term debt		2,073.5				2,277.4
Less: current portion ²		1.9				216.6
Long-term debt, excluding current portion		$	2,071.6			$	2,060.8


¹	See Note 11 for information on the fair value measurement of our long-term debt.


²	We included our 4.75% Convertible Senior Notes due 2023 (the “4.75% Notes”) in the current portion of long-term debt on our December 31, 2012 Consolidated Balance Sheet because holders of the 4.75% Notes had a repurchase option for cash, stock or a combination, at our election, at par on March 15, 2013. The 4.75% Notes were retired in the first quarter of 2013.

Debt Transactions

4.75% Convertible Senior Notes due 2023

In March 2013, we retired all $200.0 in aggregate principal amount of our 4.75% Notes. Of the amount retired, $199.997 in aggregate principal amount of the 4.75% Notes was converted, at the election of the holders, into Interpublic common stock at a conversion rate of 84.3402 shares (actual number) per $1,000 (actual number) principal amount, or approximately 16.9 shares.

Capped Call

In November 2010, we purchased capped call options to hedge the risk of price appreciation on the shares of our common stock into which our 4.75% Notes were convertible. In March 2013, we exercised our capped call options and elected net share settlement. As of March 31, 2013, we received 0.8 settlement shares from the option counterparties. The remaining exercised capped call options settled in April 2013.

Interest Rate Swaps

We enter into interest rate swaps to manage our exposure to changes in interest rates. In March and April 2012, we entered into forward-starting interest rate swap agreements with an aggregate notional amount of $300.0 to effectively lock in the benchmark rate for a forecasted issuance of debt to occur prior to December 31, 2013. These swaps qualified for hedge accounting as cash flow hedges, and, as such, the effective portion of the losses on the swaps was recorded in other comprehensive income and the ineffective portion of the losses on the swaps was recorded in other income, net. In November 2012, we terminated these swaps when we issued our 3.75% Senior Notes due 2022 (the "3.75% Notes"). The deferred losses on the swaps, recorded in accumulated other comprehensive loss, are amortized as an increase to interest expense over the term of the 3.75% Notes.

During the first quarter of 2013, we reclassified $0.4 from accumulated other comprehensive loss into interest expense. Over the next twelve months, we expect to reclassify $1.8 from accumulated other comprehensive loss into interest expense in our unaudited Consolidated Statements of Operations.

Credit Agreements

We maintain a committed corporate credit facility to increase our financial flexibility (the "Credit Agreement"). The Credit Agreement is a revolving facility expiring in May 2016, under which amounts borrowed by us or any of our subsidiaries designated under the Credit Agreement may be repaid and reborrowed, subject to an aggregate lending limit of $1,000.0 or the equivalent in other currencies. The aggregate available amount of letters of credit outstanding may decrease or increase, subject to a sublimit on letters of credit of $200.0 or the equivalent in other currencies. Our obligations under the Credit Agreement are unsecured.

We were in compliance with all of our covenants in the Credit Agreement as of March 31, 2013.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References+ Details