Quarterly report pursuant to Section 13 or 15(d)

DEBT

v3.20.2
DEBT
 6 Months Ended
Jun. 28, 2020
Debt Disclosure [Abstract]  
DEBT
NOTE 9. DEBT
Loans Payable and Commercial Paper
Loans payable, commercial paper and the related weighted-average interest rates were as follows:
In millions June 28,
2020		 December 31,
2019
Loans payable (1)
$ 109    $ 100   
Commercial paper (2)
2,027    660   
(1) Loans payable consist primarily of notes payable to various domestic and international financial institutions. It is not practicable to aggregate these notes and calculate a quarterly weighted-average interest rate.
(2) The weighted-average interest rate, inclusive of all brokerage fees, was 0.55 percent and 1.82 percent at June 28, 2020 and December 31, 2019, respectively.
We can issue up to $3.5 billion of unsecured, short-term promissory notes (commercial paper) pursuant to the Board of Directors (the Board) authorized commercial paper programs. The programs facilitate the private placement of unsecured short-term debt through third-party brokers. We intend to use the net proceeds from the commercial paper borrowings for general corporate purposes.
On April 14, 2020, we were approved for the Federal Reserve Bank of New York’s Commercial Paper Funding Facility (CPFF) program to assure access to the commercial paper funding markets during volatile credit market conditions. The CPFF was intended to provide a liquidity backstop to U.S. issuers of commercial paper through a special purpose vehicle (SPV). The facility allows us, based on our current short-term credit rating, to issue three-month unsecured commercial paper at a rate equal to a +110 basis point spread over the three-month overnight index swap rate on the date of issuance. The maximum amount of commercial paper that we may issue at any time through this program is $1.5 billion less the total principal amount of all other outstanding commercial paper that we have issued. We retain full access to our Board authorized $3.5 billion commercial paper program, as reduced by any amounts issued under this facility. The SPV is currently scheduled to cease purchasing commercial paper on March 17, 2021. As of June 28, 2020, we issued $230 million of commercial paper under the CPFF program.
Revolving Credit Facilities
On May 1, 2020, we entered into an additional 364-day credit facility agreement that allows us to borrow up to $2.0 billion of senior unsecured funds at any time through April 30, 2021. This program does not backstop or increase our borrowing capacity for our commercial paper programs. Amounts payable under this revolving credit facility will rank pro rata with all of our unsecured, unsubordinated indebtedness. Advances under the facility bear interest at (i) an alternate base rate or (ii) a rate equal to the adjusted LIBOR plus an applicable margin based on the credit ratings of our outstanding senior unsecured long-term debt. Based on our current long-term debt ratings, the applicable margin on adjusted LIBOR rate loans was 1.25 percent per annum as of June 28, 2020. Advances under the facility may be prepaid without premium or penalty, subject to customary breakage costs. This agreement includes various covenants, including, among others, maintaining a net debt to total capital leverage ratio of no more than 0.65 to 1.0.
We have access to committed credit facilities that total $5.5 billion, including a $1.5 billion 364-day facility that expires August 19, 2020, a $2.0 billion five-year facility that expires on August 22, 2023 and our new $2.0 billion 364-day facility that expires on April 30, 2021. We generally maintain credit facilities at the current or higher aggregate amounts by renewing or replacing these facilities at or before expiration. These revolving credit facilities are maintained primarily to provide backup liquidity for our commercial paper borrowings and for general corporate purposes.
At June 28, 2020, the $2,027 million of outstanding commercial paper effectively reduced the $5.5 billion of revolving credit capacity to $3.5 billion.
At June 28, 2020, we also had an additional $189 million available for borrowings under our international and other domestic credit facilities.
Long-term Debt
A summary of long-term debt was as follows:
In millions Interest Rate June 28,
2020		 December 31,
2019
Long-term debt    
Senior notes, due 2023(1)
3.65% $ 500    $ 500   
Debentures, due 2027 6.75% 58    58   
Debentures, due 2028 7.125% 250    250   
Senior notes, due 2043 4.875% 500    500   
Debentures, due 2098(2)
5.65% 165    165   
Other debt 140    59   
Unamortized discount (49)   (50)  
Fair value adjustments due to hedge on indebtedness 53    35   
Finance leases 88    90   
Total long-term debt 1,705    1,607   
Less: Current maturities of long-term debt 66    31   
Long-term debt $ 1,639    $ 1,576   
(1) In June 2020, we settled a portion of our February 2014 interest rate swap. See "Interest Rate Risk" below for additional information.
(2) The effective interest rate on this debt is 7.48%.
Principal payments required on long-term debt during the next five years are as follows:
In millions 2020 2021 2022 2023 2024
Principal payments $ 44    $ 59    $ 29    $ 524    $ 22   
Interest Rate Risk
In the first half of 2020, we entered into additional interest rate lock agreements to reduce the variability of the cash flows of the interest payments on a total of $500 million of fixed rate debt forecast to be issued in 2023 to replace our senior notes at maturity. We recorded a net gain of $10 million and net loss of $69 million in "Other comprehensive income" for the three and six months ended June 28, 2020, respectively.
In June 2020, we settled a portion of our February 2014 interest rate swap, which previously converted our $500 million debt issue, due in 2023, from fixed rate to floating rate based on a LIBOR spread. We will amortize the $30 million gain realized upon settlement over the remaining three year term of related debt.
Fair Value of Debt
Based on borrowing rates currently available to us for bank loans with similar terms and average maturities, considering our risk premium, the fair values and carrying values of total debt, including current maturities, were as follows: 
In millions June 28,
2020		 December 31,
2019
Fair value of total debt (1)
$ 4,241    $ 2,706   
Carrying values of total debt 3,841    2,367   
(1) The fair value of debt is derived from Level 2 inputs.