CSX (CSX)

NOTE 9. Debt and Credit Agreements

Debt was as follows:

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CSX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

NOTE 9. Debt and Credit Agreements, continued

NOTE 9. Debt and Credit Agreements

Debt was as follows:

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PART II

Item 8.    Financial Statements and Supplementary Data

NOTE 9. Debt and Credit Agreements, continued

NOTE 7. Debt and Credit Agreements

In September 2006, CSX issued $400 million of notes, which bear interest at 6% and mature on October 1, 2036. These notes are included in the Consolidated Balance Sheets under Long-term Debt and may be redeemed by CSX at any time.

Pursuant to the terms of CSX’s Zero Coupon Convertible Debentures (“Debentures”) due October 30, 2021, the holders have the right to require CSX to purchase their Debentures on October 30, 2006. CSX notified these holders of this right on September 29, 2006. Holders must submit notice for purchase by October 23, 2006 and have the right to withdraw such notice by October 26, 2006. If any of the Debentures are required to be purchased by CSX, they will be purchased for cash. As of September 29, 2006, the company’s cash and short-term investments balance was $660 million, which is more than adequate to fund the potential purchase of the Debentures if CSX is required to do so on October 30, 2006. As of September 29, 2006, the aggregate value of the Debentures is approximately $472 million and is included in Current Maturities of Long-term Debt in the Consolidated Balance Sheets.

In May 2006, CSX entered into a $1.25 billion five-year unsecured revolving credit facility with a group of lending banks, including JPMorgan Chase Bank, N.A., which is acting as the administrative agent. The facility replaced a $1.2 billion five-year unsecured revolving credit facility, which would have expired in May 2009.

CSX’s new facility expires in May 2011, but CSX may, with the consent of the lenders, in each of May 2007 and 2008, extend the maturity date by an additional year. Additionally, with the approval of the lending banks, CSX may increase its total borrowing capacity by $500 million, from $1.25 billion to up to $1.75 billion.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 7. Debt and Credit Agreements, continued

The new five-year facility may be used for working capital and other general corporate purposes, including support of CSX’s commercial paper. As of September 29, 2006, the facility was not drawn on, and CSX was in compliance with all covenant requirements under the facility. Commitment fees and interest rates payable under the facility are similar to fees and rates available to comparably rated investment-grade borrowers. The facility allows for borrowings at floating (LIBOR-based) interest rates, plus a spread, depending upon CSX’s senior unsecured debt ratings. As of September 29, 2006, undrawn facility fees were 10 basis points per year.

CSX’s $400 million 364-day revolving credit facility expired in May 2006, and was not replaced; no loans or other obligations were outstanding under this facility at the time it expired.

CSX’s long-term unsecured debt obligations were rated BBB and Baa2 by Standard and Poor’s and Moody’s Investors Service, respectively, with “Stable” outlook for both as of September 29, 2006. If CSX’s long-term unsecured bond ratings were reduced to BBB- and Baa3, its undrawn borrowing costs under the $1.25 billion revolving credit facility would not materially increase.

CSX’s short-term commercial paper program was rated A-2 and P-2 by Standard and Poor’s and Moody’s Investors Service, respectively. If CSX’s short-term commercial paper ratings were reduced to A-3 and P-3, it would increase CSX’s borrowing costs in the commercial paper market and reduce its access to this source of funds because of the more limited demand for lower rated commercial paper. CSX had no commercial paper outstanding at September 29, 2006 or December 30, 2005.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 7. Debt and Credit Agreements

On May 4, 2006, CSX entered into a $1.25 billion five-year unsecured revolving credit facility with a group of lending banks, including JPMorgan Chase Bank, N.A., which is acting as the administrative agent. Except for the two features described below, the facility’s terms are substantially similar to those of the facility it replaced, a $1.2 billion five-year unsecured revolving credit facility, which would have expired on May 12, 2009.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 7. Debt and Credit Agreements, continued

CSX’s new facility expires on May 4, 2011, but CSX may, with the consent of the lenders, on each of May 4, 2007, and May 4, 2008, extend the maturity date by an additional year. Additionally, this new facility includes a feature that permits CSX, with the approval of the lending banks, to increase its total borrowing capacity by $500 million, from $1.25 billion to up to $1.75 billion. CSX’s $400 million 364-day revolving credit facility expired on May 4, 2006, and was not replaced; no loans or other obligations were outstanding under this facility at the time it expired.

The new five-year facility may be used for working capital and other general corporate purposes, including support of CSX’s commercial paper. As of June 30, 2006, the facility was not drawn on, and CSX was in compliance with all covenant requirements under the facility.

Commitment fees and interest rates payable under the facility are similar to fees and rates available to comparably rated investment-grade borrowers. The facility allows for borrowings at floating (LIBOR-based) interest rates, plus a spread, depending upon CSX’s senior unsecured debt ratings. As of June 30, 2006, facility fees were 10 basis points per year.

CSX’s long-term unsecured debt obligations were rated BBB and Baa2 by Standard and Poor’s and Moody’s Investor Service, respectively. If CSX’s long-term unsecured bond ratings were reduced to BBB- and Baa3, its undrawn borrowing costs under the $1.25 billion revolving credit facility would not materially increase. In May 2006, Moody’s Investor Service revised the outlook on CSX senior unsecured debt from “Negative” to “Stable.”

CSX’s short-term commercial paper program was rated A-2 and P-2 by Standard and Poor’s and Moody’s Investor Service, respectively. If CSX’s short-term commercial paper ratings were reduced to A-3 and P-3, it would increase CSX’s borrowing costs in the commercial paper market and reduce its access to this source of funds because of the more limited demand for lower rated commercial paper. CSX had no commercial paper outstanding at June 30, 2006, or December 30, 2005.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)