offering were used to pay down commercial paper which was issued for the purchase of the Lawry’s business (see note 2).
In December 2007, we issued $250 million of 5.75% medium-term notes which are due in 2017, with net cash proceeds received of $248.3 million. These notes were also subject to an interest rate hedge as further discussed in note 8. The net proceeds were used to repay $150 million of debt which matured in 2008 with the remainder used to repay short-term debt. Since we had the ability and intent to refinance, $150 million of current maturity of long-term debt had been classified as long-term debt in the 2007 balance sheet.
We have available credit facilities with domestic and foreign banks for various purposes. In July 2008, we entered into a $500 million, 364 day revolving credit agreement with various banks for general business purposes, which was subsequently reduced to $250 million in September 2008 after issuance of our medium-term notes. Our current pricing under this new credit agreement, on a fully drawn basis, is LIBOR plus 0.25%. In July 2007, we entered into a $500 million, five-year revolving credit agreement with various banks for general business purposes. Our current pricing under this credit agreement, on a fully drawn basis, is LIBOR plus 0.25%. The amount of unused credit facilities at November 30, 2008 was $787.5 million, of which $700 million supports a commercial paper borrowing arrangement. Of these unused facilities, $287.5 million expire in 2009 and $500.0 million expire in 2012. Some credit facilities require a commitment fee. Annualized commitment fees at November 30, 2008 and 2007 were $0.3 million.
Rental expense under operating leases was $27.5 million in 2008, $27.0 million in 2007 and $25.4 million in 2006. Future annual fixed rental payments for the years ending November 30 are as follows (in millions):
2009 – $20.7
2010 – $18.0
2011 – $12.3
2012 – $ 8.5 2013 – $ 4.9
Thereafter – $ .9
At November 30, 2008, we had guarantees outstanding of $2.0 million with terms of one year or less. At November 30, 2008 and 2007, we had outstanding letters of credit of
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$25.3 million and $30.7 million, respectively. These letters of credit typically act as a guarantee of payment to certain third parties in accordance with specified terms and conditions. The unused portion of our letter of credit facility was $10.7 million at November 30, 2008.
8. FINANCIAL INSTRUMENTS
We use derivative financial instruments to enhance our ability to manage risk, including foreign currency and interest rate exposures, which exists as part of our ongoing business operations. We do not enter into contracts for trading purposes, nor are we a party to any leveraged derivative instrument. The use of derivative financial instruments is monitored through regular communication with senior management and the use of written guidelines.
All derivatives are recognized at fair value in the balance sheet and recorded in either current or noncurrent other assets or other accrued liabilities depending upon maturity and commitment.
Foreign Currency
We are potentially exposed to foreign currency fluctuations affecting net investments, transactions and earnings denominated in foreign currencies. We selectively hedge the potential effect of these foreign currency fluctuations by entering into foreign currency exchange contracts with highly-rated financial institutions.
Contracts which are designated as hedges of anticipated purchases denominated in a foreign currency (generally purchases of raw materials in U.S. dollars by operating units outside the U.S.) are considered cash flow hedges. The gains and losses on these contracts are deferred in other comprehensive income until the hedged item is recognized in cost of goods sold, at which time the net amount deferred in other comprehensive income is also recognized in cost of goods sold. Gains and losses from hedges of assets, liabilities or firm commitments are recognized through income, offsetting the change in fair value of the hedged item.
At November 30, 2008, we had foreign currency exchange contracts maturing within one year to purchase or sell $64.9 million of foreign currencies versus $63.1 million at November 30, 2007. All of these contracts were designated as hedges of anticipated purchases denominated in a foreign currency to be completed within one year or hedges of foreign currency denominated assets or liabilities. Hedge ineffectiveness was not material.
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