Note Purchase Agreements

Note purchase agreements with the Federal Financing Bank (FFB), a government-owned corporation under the general supervision of the Secretary of the Treasury, provide the Postal Service revolving credit lines of $4 billion. A short-term credit line provides up to $3.4 billion credit with two days advance notice. Borrowings under this facility are typically done on an overnight basis but can have a maturity of up to one year. The second credit facility allows borrowings of up to $600 million on the same business day the funds are needed. The interest rates for borrowings under these credit facilities are determined by the Treasury each business day.

In addition, under these agreements the Postal Service can also use a series of other notes with varying provisions to draw upon with two days advance notice, which allows the flexibility to borrow short-term or long-term, using fixed-rate or floating-rate debt. Fixed-rate notes can be either callable or non-callable. Fixed-rate debt can be repaid at any time at a price determined by the Secretary of the Treasury based on rates prevailing in the Treasury market at the time of repayment. During 2010, four floating-rate notes were repaid and three additional floating-rate notes were borrowed.

Debt as of September 30, 2010 and 2009, all of which is unsecured and not subject to sinking fund requirements, is as follows:

At September 30, 2010, scheduled repayment of debt principal, exclusive of capital leases, is as follows: