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Author: TMFTardior Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 711  
Subject: Re: The Big "D" (Debt) Date: 2/1/2000 12:58 PM
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Hey Gooooooooey,

Good questions. I think that the major concern about YUM, as we've seen in many a post on this board, is its debt load.

The reason that you cannot find information about the debt on the Snapshot page is that the company's debt is so large that it has eliminated all shareholder equity. The balance sheet equates assets with liabilities plus shareholder equity. Equity, therefore, is the result of subtracting liabilities from assets. Since YUM's equity is negative, the debt/equity ratio cannot be calculated.

YUM's long-term debt, as of 9/4/99, stood at $2.6 billion. There is a positive side to this: that debt number is down from $3.4 billion at the end of last year. The company has paid off $2 billion in debt since the spin-off. Still, the long-term debt represents 61% of total assets.

Most of that debt is held in YUM's Revolving Credit Facility ($1.13 billion) and Term Loan Facility ($810 million). As far as the interest rate on that debt goes, this passage is from page 35 of the October 10-Q:

We use various derivative instruments with the objective of reducing volatility in our borrowing costs. We have utilized interest rate swap and forward rate agreements to effectively convert a portion of our variable rate (LIBOR) bank debt to fixed rate. We have also entered into interest rate arrangements to limit the range of effective interest rates on a portion of our variable rate bank debt. Other derivative instruments may be considered from time to time as well to manage our debt portfolio and to hedge foreign currency exchange exposures. At September 4, 1999, our weighted average interest rate on our variable rate debt was 6.2% which included the effects of the associated interest rate swaps.

For more current info, we'll have to wait for 2/9. Until then, let's see if today's action stimulates discussion!

Fool on,
BZL
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