Quarterly report pursuant to Section 13 or 15(d)

DEBT AND FINANCING ARRANGEMENTS

v3.20.2
DEBT AND FINANCING ARRANGEMENTS
6 Months Ended
Jun. 30, 2020
Debt Disclosure [Abstract]  
DEBT AND FINANCING ARRANGEMENTS DEBT AND FINANCING ARRANGEMENTS
The carrying value of our outstanding debt as of June 30, 2020 and December 31, 2019 consists of the following (in millions):
Principal
Amount
Carrying Value
Maturity 2020 2019
Commercial paper $ 1,909    2020 $ 1,908    $ 3,234   
Fixed-rate senior notes:
3.125% senior notes
1,500    2021 1,524    1,524   
2.050% senior notes
700    2021 699    699   
2.450% senior notes
1,000    2022 1,035    1,003   
2.350% senior notes
600    2022 599    598   
2.500% senior notes
1,000    2023 996    995   
2.800% senior notes
500    2024 497    497   
2.200% senior notes
400    2024 398    398   
3.900% senior notes
1,000    2025 995    —   
2.400% senior notes
500    2026 498    498   
3.050% senior notes
1,000    2027 992    992   
3.400% senior notes
750    2029 745    745   
2.500% senior notes
400    2029 397    397   
4.450% senior notes
750    2030 743    —   
6.200% senior notes
1,500    2038 1,483    1,483   
5.200% senior notes
500    2040 493    —   
4.875% senior notes
500    2040 490    490   
3.625% senior notes
375    2042 368    368   
3.400% senior notes
500    2046 491    491   
3.750% senior notes
1,150    2047 1,137    1,136   
4.250% senior notes
750    2049 742    742   
3.400% senior notes
700    2049 688    688   
5.300% senior notes
1,250    2050 1,230    —   
Floating-rate senior notes:
Floating-rate senior notes 350    2021 350    349   
Floating-rate senior notes 400    2022 399    399   
Floating-rate senior notes 500    2023 499    499   
Floating-rate senior notes 1,039    2049-2067 1,027    1,028   
8.375% Debentures:
8.375% debentures
—    2020 —    426   
8.375% debentures
276    2030 281    281   
Pound Sterling notes:
5.500% notes
82    2031 81    86   
5.125% notes
560    2050 531    566   
Euro senior notes:
0.375% notes
786    2023 783    779   
1.625% notes
786    2025 782    779   
1.000% notes
561    2028 559    556   
1.500% notes
561    2032 558    556   
Floating-rate senior notes 561    2020 561    559   
Canadian senior notes:
2.125% notes
549    2024 547    571   
Finance lease obligations 515    2020-2210 515    498   
Facility notes and bonds 320    2029-2045 320    320   
Other debt   2020-2025    
Total debt $ 27,087    26,948    25,238   
Less: Current maturities (3,749)   (3,420)  
Long-term debt $ 23,199    $ 21,818   
Commercial Paper
We are authorized to borrow up to $10.0 billion under a U.S. commercial paper program and €5.0 billion (in a variety of currencies) under a European commercial paper program. We had the following amounts outstanding under these programs as of June 30, 2020: $1.7 billion with an average interest rate of 0.54% and €228 million ($256 million) with an average interest rate of -0.41%. As of June 30, 2020, we have classified the entire commercial paper balance as a current liability on our consolidated balance sheets.
Debt Classification
We have classified a portion of our debt instruments that mature within twelve months and certain floating-rate senior notes with put options as long-term due to our intent and ability to refinance the debt.
Debt Repayments
On April 1, 2020, our 8.375% senior notes with a principal balance of $424 million matured and were repaid in full.
Debt Issuances
On March 24, 2020 we issued four series of notes, in the following principal amounts: $1.0 billion, $750 million, $500 million and $1.25 billion. These notes bear interest at 3.90%, 4.45%, 5.20% and 5.30%, respectively, and will mature on April 1, 2025, April 1, 2030, April 1, 2040 and April 1, 2050, respectively. Interest on the notes is payable semi-annually, beginning October 2020. Each series of notes is callable at our option at a redemption price equal to the greater of 100% of the principal amount, or the sum of the present values of scheduled payments of principal and interest, plus accrued and unpaid interest.
In such event, the present values of scheduled principal and interest payments are discounted to the redemption date on a semi-annual basis at the discount rate of the Treasury Rate plus 50 basis points, and are determined as follows:
On the 3.90% notes, payments from the redemption date until one month prior to maturity
On the 4.45% notes, payments from the redemption date until three months prior to maturity
On the 5.20% and 5.30% notes, payments from the redemption date until six months prior to maturity
Sources of Credit
We maintain two credit agreements with a consortium of banks. One of these agreements provides revolving credit facilities of $2.0 billion, and expires on December 8, 2020. Generally, amounts outstanding under this facility bear interest at a periodic fixed rate equal to LIBOR for the applicable interest period and currency denomination, plus an applicable margin. Alternatively, a fluctuating rate of interest equal to the highest of (1) the rate of interest last quoted by The Wall Street Journal as the prime rate in the United States; (2) the Federal Funds effective rate plus 0.50%; and (3) LIBOR for a one month interest period plus 1.00%, plus an applicable margin, may be used at our discretion. In each case, the applicable margin for advances bearing interest based on LIBOR is a percentage determined by quotations from Markit Group Ltd. for our one-year credit default swap spread, subject to a minimum rate of 0.25% and a maximum rate of 1.00%. The applicable margin for advances bearing interest based on the prime rate is 1.00% below the applicable margin for LIBOR advances (but not lower than 0%). We are also able to request advances under this facility based on competitive bids for the applicable interest rate. There were no amounts outstanding under this facility as of June 30, 2020.
The second agreement provides revolving credit facilities of $2.5 billion, and expires on December 11, 2023. Generally, amounts outstanding under this facility bear interest at a periodic fixed rate equal to LIBOR for the applicable interest period and currency denomination, plus an applicable margin. Alternatively, a fluctuating rate of interest equal to the highest of (1) the rate of interest last quoted by The Wall Street Journal as the prime rate in the United States; (2) the Federal Funds effective rate plus 0.50%; and (3) LIBOR for a one month interest period plus 1.00%, plus an applicable margin, may be used at our discretion. In each case, the applicable margin for advances bearing interest based on LIBOR is a percentage determined by quotations from Markit Group Ltd. for our one-year credit default swap spread, interpolated for a period from the date of determination of such credit default swap spread in connection with a new interest period until the latest maturity date of this facility then in effect (but not less than a period of one year). The minimum applicable margin rate is 0.10% and the maximum applicable margin rate is 0.75% per annum. The applicable margin for advances bearing interest based on the prime rate is 1.00% below the applicable margin for LIBOR advances (but not less than 0%). We are also able to request advances under this facility based on competitive bids. There were no amounts outstanding under this facility as of June 30, 2020.
Debt Covenants
Our existing debt instruments and credit facilities subject us to certain financial covenants. As of June 30, 2020, and for all periods presented, we have satisfied these financial covenants. These covenants limit the amount of secured indebtedness that we may incur, and limit the amount of attributable debt in sale-leaseback transactions, to 10% of net tangible assets. As of June 30, 2020, 10% of net tangible assets was equivalent to $4.0 billion; however, we had no covered sale-leaseback transactions or secured indebtedness outstanding. We do not expect these covenants to have a material impact on our financial condition or liquidity.
Fair Value of Debt
Based on the borrowing rates currently available to us for debt with similar terms and maturities, the fair value of long-term debt, including current maturities, was approximately $30.6 and $26.9 billion as of June 30, 2020 and December 31, 2019, respectively. We utilized Level 2 inputs in the fair value hierarchy of valuation techniques to determine the fair value of all of our debt instruments.