|6 Months Ended|
Jun. 28, 2020
|Debt Disclosure [Abstract]|
NOTE 9. DEBT
Loans Payable and Commercial Paper
Loans payable, commercial paper and the related weighted-average interest rates were as follows:
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.
A summary of long-term debt was as follows:
Principal payments required on long-term debt during the next five years are as follows:
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 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:
The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef