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| <NonNumbericText> <div style="font-size:12pt"><p>18. Long-term debt <br /><br /><br />Shire 2.75% Convertible Bonds due 2014 <br /><br />On May 9, 2007 Shire issued $1,100 million in principal amount of 2.75% convertible bonds due 2014 and convertible into fully paid ordinary shares of Shire plc (the “Bonds”). The net proceeds of issuing the Bonds, after deducting the commissions and other direct costs of issue, totaled $1,081.7 million. In connection with the Scheme of arrangement the Trust Deed was amended and restated in 2008 in order to provide that, following the substitution of Shire plc in place of Old Shire as the principal obligor and issuer of the Convertible Bonds, the Bonds would be convertible into ordinary shares of Shire plc.<br /><br />The Bonds were issued at 100% of their principal amount, and unless previously purchased and cancelled, redeemed or converted, will be redeemed on May 9, 2014 (the “Final Maturity Date”) at their principal amount. <br />The Bonds bear interest at 2.75% per annum, payable semi-annually in arrears on November 9 and May 9. The Bonds constitute direct, unconditional, unsubordinated and unsecured obligations of the Company, and rank pari passu and ratably, without any preference amongst themselves, and equally with all other existing and future unsecured and unsubordinated obligations of the Company.<br /><br />The Bonds may be redeemed at the option of the Company, (the “Call Option”), at their principal amount together with accrued and unpaid interest if: (i) at any time after May 23, 2012 if on no less than 20 dealing days in any period of 30 consecutive dealing days the value of Shire’s Ordinary Shares underlying each Bond in the principal amount of $100,000 would exceed $130,000; or (ii) at any time conversion rights have been exercised, and/or purchases and corresponding cancellations, and/or redemptions effected in respect of 85% or more in principal amount of Bonds originally issued. The Bonds may also be redeemed at the option of the Bond holder at their principal amount including accrued but unpaid interest on May 9, 2012 (the “Put Option”), or following the occurrence of a change of control. The Bonds are repayable in US dollars, but also contain provisions entitling the Company to settle redemption amounts in Pounds sterling, or in the case of the Final Maturity Date and following exercise of the Put Option, by delivery of the underlying ordinary shares and a cash top-up amount.<br /><br />The Bonds are convertible into ordinary shares during the conversion period, being the period from June 18, 2007 until the earlier of: (i) the close of business on the date falling fourteen days prior to the Final Maturity Date; (ii) if the Bonds have been called for redemption by the Company, the close of business fourteen days before the date fixed for redemption; (iii) the close of business on the day prior to a Bond holder giving notice of redemption in accordance with the conditions; and (iv) the giving of notice by the trustee that the Bonds are accelerated by reason of the occurrence of an event of default.<br /><br />Upon conversion, the Bond holder is entitled to receive ordinary shares at the conversion price of $33.17 per ordinary share, (subject to adjustment as outlined below).<br /><br />The conversion price is subject to adjustment in respect of (i) any dividend or distribution by the Company, (ii) a change of control and (iii) customary anti-dilution adjustments for, inter alia, share consolidations, share splits, spin-off events, rights issues, bonus issues and reorganizations. The initial conversion price of $33.5879 was adjusted to $33.17 with effect from March 11, 2009 as a result of cumulative dividend payments during the period from October 2007 to April 2009 inclusive. The shares issued on conversion will be delivered credited as fully paid, and will rank pari passu in all respects with all fully paid shares in issue on the relevant conversion date.<br /><br />The Bonds have been recorded at their principal amount within Non-current liabilities. Direct costs of issue of the Bonds paid in the year to December 31, 2007 totalled $18.3 million. These costs are being amortized to interest expense using the effective interest method over the five year period to the Put Option date. At December 31, 2009 $8.8 million was deferred ($3.8 million within other current assets and $5.0 million within other non-current assets).<br /><br />Revolving Credit Facilities Agreement<br /><br />Shire has a committed revolving credit facility (the “RCF”) in an aggregate amount of $1,200 million with ABN Amro Bank N.V.; Barclays Capital; Citigroup Global Markets Limited; The Royal Bank of Scotland plc; Lloyds TSB Bank plc; Bank of America N.A.; and Morgan Stanley Bank. The RCF, which includes a $250 million swingline facility, may be used for general corporate purposes and matures on February 20, 2012. There were no borrowings under the RCF as of December 31, 2009.<br /><br />The interest rate on each loan drawn under the RCF for each interest period, is the percentage rate per annum which is the aggregate of the applicable margin (ranging from 0.40 to 0.80 per cent per annum) and LIBOR for the applicable currency and interest period. Shire also pays a commitment fee on undrawn amounts at 35 per cent per annum of the applicable margin.<br /><br />Under the RCF it is required that (i) Shire’s ratio of Net Debt to EBITDA (as defined within the Multicurrency Term and Revolving Facilities Agreement (“the RCF Agreement”)) does not exceed 3.5 to 1 for either the 12 month period ending December 31 or June 30 unless Shire has exercised its option (which is subject to certain conditions) to increase it to 4.0 to 1 for two consecutive testing dates; (ii) the ratio of EBITDA to Net Interest (as defined in the RCF Agreement) must not be less than 4.0 to 1, for either the 12 month period ending December 31 or June 30 and (iii) additional limitations on the creation of liens, disposal of assets, incurrence of indebtedness, making of loans, giving of guarantees and granting security over assets. </p></div> </NonNumbericText> |
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