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:

Indebtedness to Federal Financing Bank1 (dollars in millions)

Maturity

Debt Type

September 30, 2010

September 30, 2009

Balance

Rate%

Balance

Rate%

December 30, 2010

Fixed Rate-Payable at Maturity

$ 1,900

0.282 %

$

%

January 31, 2014

Fixed Rate-Payable at Maturity

300

2.035 %

300

2.035%

May 2, 2016

Fixed Rate-Payable at Maturity

300

2.844 %

300

2.844%

November 15, 2018

Fixed Rate-Payable at Maturity

500

3.048 %

500

3.048%

February 15, 2019

Fixed Rate-Payable at Maturity

700

3.296 %

700

3.296%

May 15, 2019

Fixed Rate-Payable at Maturity

1,000

3.704 %

1,000

3.704%

May 15, 2019

Fixed Rate-Payable at Maturity

500

3.513 %

500

3.513%

May 17, 2038

Fixed Rate-Payable at Maturity

200

3.770 %

200

3.770%

February 15, 2039

Fixed Rate-Payable at Maturity

1,000

3.790 %

1,000

3.790%

July 15, 2011

Floating Rate2

1,000

0.206 %

%

July 15, 2011

Floating Rate2

700

0.206 %

%

July 15, 2011

Floating Rate2

500

0.206 %

%

November 15, 2042

Floating Rate

%

500

0.184%

June 15, 2043

Floating Rate

%

500

0.271%

December 15, 2042

Floating Rate

%

1,025

0.216%

October 15, 2009

Floating Rate

%

475

0.155%

 

Short-Term Revolving Credit Line3

3,400

0.206 %

3,200

0.145%

Total Debt

$ 12,000

 

$ 10,200

 

Less Current Portion of Debt

7,500

 

3,675

 

Less Long-term Portion of Debt

$ 4,500

 

$ 6,525

 

1 All debt is repurchasable at any time at a price determined by the Secretary of the Treasury, based on rates prevailing in the Treasury Security market at the time of repricing.

2 Floating Rate Note – Repurchasable at par and the interest rate resets on October 15, 2010, January 15, 2011, and April 15, 2011. Rate reset to 0.258% on October 15, 2010.

3 Funds are typically borrowed overnight. Current credit agreements with FFB expire on May 3, 2011. Prior credit agreements expired April 30, 2010.

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

Scheduled Debt Principal Repayments (dollars in millions)

2011

$ 7,500

2012

2013

2014

300

2015

After 2015

4,200

Total Debt

$ 12,000