Debt

Lines of Credit

We have a $2.5 billion committed line of credit ("Credit Agreement") with a consortium of banks expiring on October 12, 2016. We have the ability to classify borrowings under the Credit Agreement as long-term. The Credit Agreement supports the issuance of up to $1.5 billion of commercial paper issuances and such issuances reduce the amount available under the Credit Agreement. At December 31, 2013 and 2012, there were no outstanding commercial paper issuances or borrowings under the Credit Agreement. We also have uncommitted lines of credit aggregating $1,051.5 million and $878.2 million at December 31, 2013 and 2012, respectively.

Available and unused lines of credit at December 31, 2013 and 2012 were (in millions):



	2013		2012

Credit Agreement	$	2,500.0	$	2,500.0
Uncommitted lines of credit	1,051.5		878.2
Available and unused lines of credit	$	3,551.5	$	3,378.2

The Credit Agreement contains financial covenants that require us to maintain a Leverage Ratio of consolidated indebtedness to consolidated EBITDA to no more than 3 times for the most recently ended 12-month period (under the Credit Agreement, EBITDA is defined as earnings before interest, taxes, depreciation and amortization) and an Interest Coverage Ratio of consolidated EBITDA to interest expense of at least 5 times for the most recently ended 12-month period. At December 31, 2013 we were in compliance with these covenants, as our Leverage Ratio was 1.9 times and our Interest Coverage Ratio was 10.7 times. The Credit Agreement does not limit our ability to declare or pay dividends.

Short-Term Borrowings

Short-term borrowings of $5.9 million and $6.4 million at December 31, 2013 and 2012, respectively, represent bank overdrafts and credit lines of our international subsidiaries. The bank overdrafts and credit lines are treated as unsecured loans pursuant to the agreements supporting the facilities. Due to the short-term nature of these instruments, carrying value approximates fair value. At December 31, 2013 and 2012, the weighted average interest rate on these borrowings was 5.6% and 9.5%, respectively.

Debt - General

Omnicom Capital Inc. (“OCI”) our wholly-owned finance subsidiary, together with us, is a co-obligor of all our Senior Notes and our Convertible Notes due July 31, 2032 (“2032 Notes”). The Senior Notes and 2032 Notes are a joint and several liability of us and OCI, and we unconditionally guarantee OCI’s obligations with respect to the Senior Notes and 2032 Notes. OCI provides funding for our operations by incurring debt and lending the proceeds to our operating subsidiaries. OCI’s assets consist of cash and cash equivalents and intercompany loans made to our operating subsidiaries and the related interest receivable. There are no restrictions on the ability of OCI or us to obtain funds from our subsidiaries through dividends, loans or advances. Our Senior Notes and 2032 Notes are senior unsecured obligations that rank in equal right of payment with all existing and future unsecured senior indebtedness.

Long-Term Notes Payable

Long-term notes payable at December 31, 2013 and 2012 were (in millions):



	2013		2012

5.90% Senior Notes due April 15, 2016	$	1,000.0	$	1,000.0
6.25% Senior Notes due July 15, 2019	500.0		500.0
4.45% Senior Notes due August 15, 2020	1,000.0		1,000.0
3.625% Senior Notes due May 1, 2022	1,250.0		1,250.0
Other notes and loans	0.5		0.4
	3,750.5		3,750.4
Unamortized premium (discount) on Senior Notes, net	14.7		16.0
Deferred gain from termination of interest rate swaps on Senior Notes due 2016	15.9		23.1
	3,781.1		3,789.5
Less current portion	0.4		0.4
Long-term notes payable	$	3,780.7	$	3,789.1

In 2011, we terminated and settled a series of interest rate swaps on our 5.90% Senior Notes due April 15, 2016 (“2016 Notes”). Upon termination of the swaps, we discontinued hedge accounting and recorded a deferred gain of $33.2 million, which is being amortized as a reduction of interest expense through the maturity of the 2016 Notes.

Convertible Debt

Convertible debt at December 31, 2013 and 2012 was (in millions):



	2013		2012

Convertible Notes due July 31, 2032	$	252.7	$	252.7
Convertible Notes due June 15, 2033	—		0.1
Convertible Notes due July 1, 2038	—		406.6
	252.7		659.4
Less current portion	—		—
Convertible debt	$	252.7	$	659.4

On May 16, 2013, we called our Convertible Notes due June 15, 2033 (“2033 Notes”) and our Convertible Notes due July 1, 2038 (“2038 Notes”) for redemption on June 17, 2013 at a redemption price of 100% of the principal amount. As provided in the indenture governing the 2033 Notes and the 2038 Notes, prior to redemption the noteholders had the right to convert their 2033 Notes and 2038 Notes into shares of our common stock at a conversion rate of 19.4174 shares per $1,000 principal amount at any time prior to June 13, 2013. Substantially all the noteholders exercised their conversion right. We paid $406.1 million in cash representing the principal amount of the 2033 Notes and 2038 Notes that were converted and issued 1,499,792 shares of our common stock to satisfy the conversion premium. In addition, we reclassified $34.5 million, representing the tax effect of the difference between the issue price of the notes and the conversion value from deferred tax liabilities to additional paid-in capital. On June 17, 2013, we paid $0.6 million to redeem the remaining 2033 Notes and 2038 Notes that were not converted.

2032 Notes

In 2002, we issued $900 million of our 2032 Notes, of which $647.3 million have been repurchased and retired. The 2032 Notes are convertible only upon the occurrence of certain events, including: if our common stock trades above certain levels; if we effect extraordinary transactions, which includes the consummation of the Business Combination; if we mail a notice of redemption; or if the credit ratings assigned to the 2032 Notes are downgraded to BBB or lower by Standard & Poor's Rating Service or to Baa3 or lower by Moody’s Investors Service. These events would not result in an adjustment of the number of shares issuable upon conversion. Holders of the 2032 Notes have the right to put the notes back to us for cash on July 31 of each year and we have the right to redeem the notes for cash at any time on or after July 31, 2014. There are no events that accelerate the noteholders’ put rights.

If the 2032 Notes become convertible and the holders of our 2032 Notes exercise their conversion right, the conversion obligation is equal to a conversion value determined on the day of conversion, calculated by multiplying the share price at the close of business on that day by 18.313 shares (subject to any adjustments required by the Indenture governing the 2032 Notes). We satisfy the conversion value by paying the initial principal amount of the note in cash and the balance of the conversion value in cash or shares, at our option. The put obligation can only be satisfied in cash.

The 2032 Notes provided the noteholders with certain rights that we considered to be embedded derivatives. Embedded derivatives could be required to be bifurcated and accounted for separately from the underlying host instrument. The noteholders’ rights considered for bifurcation were: (1) an embedded conversion option to convert the bonds into shares of our common stock, (2) the right to put the 2032 Notes back to us for repurchase (noteholders' put right) and our agreement to not call the 2032 Notes except on certain specific dates (no call right) and (3) the right to collect contingent cash interest from us if certain criteria are met. The embedded derivatives, which were accounted for as described below, had no impact on the carrying value of the 2032 Notes and accordingly, the 2032 Notes are carried at their maturity value.

At issuance, the embedded conversion option qualified for the exception covering convertible debt in FASB ASC Topic 815, Derivatives and Hedging and we are not required to separately account for the embedded conversion option. The embedded conversion option met the criteria and would, if converted, be accounted for in equity as if it was a freestanding derivative. We are not required to separately value and account for the noteholders’ put right and the no call right. These rights were considered to be clearly and closely related to the underlying 2032 Notes and are not contingently exercisable. Additionally, the debt was not issued with a substantial discount or premium. Lastly, the noteholders’ right to collect contingent cash interest is a derivative and is required to be marked to market value each reporting period with changes recorded in interest expense. The value of this right is primarily linked to the price of our common stock and not the debt host contract. Therefore, the right to collect contingent cash interest is not clearly and closely related to the 2032 Notes and is required to be accounted for separately.

If the market price of the 2032 Notes exceeds certain thresholds during any six month period February 1 to July 31 and August 1 to January 31, we may be required to pay contingent cash interest on the 2032 Notes. Our 2032 Notes accrue contingent interest for the periods August 1, 2013 to January 31, 2014 and February 1, 2014 to July 31, 2014. Contingent interest of $2.81 per $1,000 principal amount was paid on October 31, 2013 and is payable on January 31, 2014, April 30, 2014 and July 31, 2014. In the third quarter of 2013, we recorded a charge to interest expense of $2.8 million, representing the fair value of the contingent interest derivative. The contingent interest derivative is marked-to-market through results of operations each period and is included in other current liabilities in our balance sheet.

In 2004, our then outstanding convertible notes, including the 2032 Notes, were amended to include a provision to satisfy the conversion value by paying the principal amount of the notes in cash and the balance of the conversion option in cash or shares at our option. In prior years, as required by U.S. GAAP, we separately accounted for the liability and equity components of the notes by allocating the proceeds at the date of amendment of the notes between the liability and equity components and recording $47.5 million, $28.5 million after tax, of interest expense related to the equity conversion option over the expected life of the conversion option. The convertible notes, including the 2032 Notes, were issued at par (no discount or premium) and do not bear any interest. As a result, we concluded that absent any non-contractual supplemental interest payment the noteholders have no economic incentive to hold the notes past the contractual put dates. Therefore, the expected life of the conversion option was determined to be the period from amendment of the notes in 2004 to the first respective put date, or 1 year in the case of the 2032 Notes and 1.6 years in the case of the 2038 Notes. The amortization of the value of the conversion option was recorded as interest expense in those years.

From time to time, we have made non-contractual supplemental interest payments to holders of our Convertible Notes. Supplemental interest payments were amortized to interest expense ratably over the period to the next put date. No supplemental interest payments were paid during the three year period ended December 31, 2013.

Interest Expense

The components of interest expense for the three years ended December 31, 2013 were (in millions):



	2013		2012		2011

Long-term notes payable	$	174.7	$	156.2	$	125.8
Amortization of supplemental interest payments	5.9		6.7		10.0
Commercial paper	1.7		1.3		2.5
Fees	6.5		6.2		7.1
Other	8.4		9.3		12.7
	$	197.2	$	179.7	$	158.1

Maturities

The stated maturities of our long-term notes payable and convertible debt at December 31, 2013 are (in millions):



2014	$	0.4
2015	—
2016	1,000.1
2017	—
2018	—
Thereafter	3,002.7
	$	4,003.2