Note 5—Seasonal Financing and Debt

Seasonal Financing

In November 2011, Mattel issued $300.0 million of unsecured 2.50% senior notes (“2.50% Senior Notes”) due November 1, 2016 and $300.0 million of unsecured 5.45% senior notes (“5.45% Senior Notes”) due November 1, 2041 (collectively, “2011 Senior Notes”). Interest on the 2011 Senior Notes is payable semi-annually on May 1 and November 1 of each year, which began May 1, 2012. Mattel may redeem all or part of the 2.50% Senior Notes at any time or from time to time at its option, at a redemption price equal to the greater of (i) 100% of the principal amount of the notes being redeemed plus accrued and unpaid interest to but excluding the redemption date, and (ii) a “make-whole” amount based on the yield of a comparable US Treasury security plus 25 basis points. Mattel may redeem all or part of the 5.45% Senior Notes at any time or from time to time at its option prior to May 1, 2041 (six months prior to the maturity date of the 5.45% Senior Notes), at a redemption price equal to the greater of (i) 100% of the principal amount of the notes being redeemed plus accrued and unpaid interest to but excluding the redemption date, and (ii) a “make-whole” amount based on the yield of a comparable US Treasury security plus 35 basis points. Mattel may redeem all or part of the 5.45% Senior Notes at any time or from time to time at its option on or after May 1, 2041 (six months prior to the maturity date for the 5.45% Senior Notes), at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to but excluding the redemption date.

Mattel maintains and periodically amends or replaces its domestic unsecured committed revolving credit facility (“Credit Facility”) with a commercial bank group that is used as a back-up facility to Mattel’s commercial paper program, which is used as the primary source of financing for the seasonal working capital requirements of its domestic subsidiaries. The Credit Facility was amended and restated on March 8, 2011 to, among other things, (i) extend the maturity date of the Credit Facility to March 8, 2015, (ii) increase aggregate commitments under the Credit Facility to $1.40 billion, with an “accordion feature,” which allows Mattel to increase the aggregate availability under the Credit Facility to $1.60 billion under certain circumstances, (iii) decrease the applicable interest rate margins to a range of 0.25% to 1.50% above the applicable base rate for base rate loans, and 1.25% to 2.50% above the applicable London Interbank Borrowing Rate for Eurodollar rate loans, in each case depending on Mattel’s senior unsecured long-term debt rating, and (iv) decrease commitment fees to a range of 0.15% to 0.40% of the unused commitments under the Credit Facility.

The borrowing capacity of the amended Credit Facility is $1.40 billion for four years, which exceeded the $1.10 billion for one year remaining on the Credit Facility prior to the March 2011 amendment. The proportion of unamortized debt issuance costs from the prior Credit Facility renewal related to creditors involved in both the prior Credit Facility and amended Credit Facility, and borrowing costs incurred as a result of the amendment were deferred and will be amortized over the term of the amended Credit Facility.

In connection with the execution of the amendment of the Credit Facility, Mattel terminated its $300.0 million domestic receivables sales facility, which was a sub-facility of the Credit Facility. Mattel did not sell receivables pursuant to the domestic receivables facility in 2011 or 2010.

The outstanding amounts of accounts receivable that have been sold under other international factoring arrangements were $25.3 million and $25.9 million at December 31, 2012 and 2011, respectively. These amounts have been excluded from Mattel’s consolidated balance sheets.

Mattel is required to meet financial covenants at the end of each quarter and fiscal year, using the formulae specified in the Credit Facility agreement to calculate the ratios. Mattel was in compliance with such covenants at the end of each fiscal quarter and fiscal year in 2012. As of December 31, 2012, Mattel’s consolidated debt-to-EBITDA ratio, as calculated per the terms of the Credit Facility agreement, was 1.3 to 1 (compared to a maximum allowed of 3.0 to 1), and Mattel’s interest coverage ratio was 13.6 to 1 (compared to a minimum required of 3.50 to 1).

The Credit Facility is a material agreement and failure to comply with the financial covenant ratios may result in an event of default under the terms of the facility. If Mattel defaulted under the terms of the Credit Facility, its ability to meet its seasonal financing requirements could be adversely affected.

Mattel believes its cash on hand, amounts available under its Credit Facility, and its foreign credit lines will be adequate to meet its seasonal financing requirements in 2013.

To finance seasonal working capital requirements of certain foreign subsidiaries, Mattel avails itself of individual short-term credit lines with a number of banks. As of December 31, 2012, foreign credit lines totaled approximately $275 million. Mattel expects to extend the majority of these credit lines throughout 2013.

In May 2011, a major credit rating agency changed Mattel’s long-term credit rating from BBB+ to A- and maintained its short-term credit rating of F-2 and outlook at stable. In April 2011, another major credit rating agency changed Mattel’s long-term credit rating from BBB to BBB+ and maintained its short-term credit rating of A-2 and outlook at stable. Additionally, in April 2011, a major credit rating agency changed Mattel’s long-term credit rating from Baa2 to Baa1 and maintained its short-term credit rating of P-2 and outlook at stable. A reduction in Mattel’s credit ratings could increase the cost of obtaining financing.

Short-Term Borrowings

As of December 31, 2012 and 2011, Mattel had foreign short-term bank loans outstanding of $9.8 million and $8.0 million, respectively. As of December 31, 2012 and 2011, Mattel had no borrowings outstanding under the Credit Facility.

During 2012 and 2011, Mattel had average borrowings of $44.3 million and $15.9 million, respectively, under its foreign short-term bank loans, and $661.9 million and $599.7 million, respectively, under the Credit Facility and other short-term borrowings, to help finance its seasonal working capital requirements. The weighted average interest rate on foreign short-term bank loans during 2012 and 2011 was 7.8% and 11.4%, respectively. The weighted average interest rate on the Credit Facility and other short-term borrowings during both 2012 and 2011 was 0.4%.

Long-Term Debt

Mattel’s long-term debt consists of the following:


	December 31,
	2012			2011
	(In thousands)
Medium-term notes due November 2013	$	50,000		$	100,000
2008 Senior Notes due March 2013		350,000			350,000
2010 Senior Notes due October 2020 and October 2040		500,000			500,000
2011 Senior Notes due November 2016 and November 2041		600,000			600,000

		1,500,000			1,550,000
Less: current portion		(400,000	)		(50,000	)

Total long-term debt	$	1,100,000		$	1,500,000

Mattel’s Medium-term notes bear interest at fixed rates ranging from 6.50% to 6.61%, with a weighted average interest rate of 6.53% and 6.89% as of December 31, 2012 and 2011, respectively.

Mattel’s 2008 Senior Notes bear interest at a fixed rate of 5.625%. Mattel’s 2010 Senior Notes bear interest at fixed rates ranging from 4.35% to 6.20%, with a weighted average interest rate of 5.275% as of December 31, 2012 and 2011.

During 2011, Mattel repaid the remaining $200.0 million of its 2006 Senior Notes in connection with its scheduled maturity. During 2012 and 2011, Mattel repaid $50.0 million of its Medium-term notes in connection with their scheduled maturities.

The aggregate amount of long-term debt maturing in the next five years and thereafter is as follows:


	Medium- Term Notes		2008 Senior Notes		2010 Senior Notes		2011 Senior Notes		Total
	(In thousands)
2013	$	50,000	$	350,000	$	—	$	—	$	400,000
2014		—		—		—		—		—
2015		—		—		—		—		—
2016		—		—		—		300,000		300,000
2017		—		—		—		—		—
Thereafter		—		—		500,000		300,000		800,000

	$	50,000	$	350,000	$	500,000	$	600,000	$	1,500,000