Quarterly report pursuant to Section 13 or 15(d)

DEBT

v3.20.2
DEBT
 9 Months Ended
Sep. 27, 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 September 27,
2020		 December 31,
2019
Loans payable (1)
$ 129  $ 100 
Commercial paper 316 
(2)
 660 
(3)
(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 0.03 percent at September 27, 2020. This includes $116 million of borrowings under the EUR program that were at a negative weighted-average interest rate of 0.27 percent and $200 million of borrowings under the U.S. program at a weighted-average rate of 0.20 percent.
(3) The weighted-average interest rate, inclusive of all brokerage fees, was 1.82 percent at December 31, 2019. All borrowings were at positive interest rates.
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. At September 27, 2020, there were no outstanding borrowings under the CPFF program.
Revolving Credit Facilities
On August 19, 2020, we entered into an amended and restated 364-day credit agreement that allows us to borrow up to $1.5 billion of unsecured funds at any time prior to August 18, 2021. This credit agreement amends and restates the prior $1.5 billion 364-day credit facility that matured on August 19, 2020.
On August 24, 2020, we terminated our 364-day credit facility that had been entered into on May 1, 2020, concurrent with the $2 billion bond issuance on August 24, 2020, described below.
We have access to committed credit facilities that total $3.5 billion, including the new $1.5 billion 364-day facility that expires August 18, 2021 and our $2.0 billion five-year facility that expires on August 22, 2023. We 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 September 27, 2020, the $316 million of outstanding commercial paper effectively reduced the $3.5 billion of revolving credit capacity to $3.2 billion.
At September 27, 2020, we also had an additional $191 million available for borrowings under our international and other domestic credit facilities.
Long-term Debt
On August 24, 2020, we issued $2 billion aggregate principal amount of senior unsecured notes consisting of $500 million aggregate principal amount of 0.75% senior unsecured notes due in 2025, $850 million aggregate principal amount of 1.50% senior unsecured notes due in 2030 and $650 million aggregate principal amount of 2.60% senior unsecured notes due in 2050. We received net proceeds of $1.98 billion. The senior unsecured notes pay interest semi-annually on March 1 and September 1, commencing on March 1, 2021. The indenture governing the senior unsecured notes contains covenants that, among other matters, limit (i) our ability to consolidate or merge into, or sell, assign, convey, lease, transfer or otherwise dispose of all or substantially all of our and our subsidiaries' assets to another person, (ii) our and certain of our subsidiaries' ability to create or assume liens and (iii) our and certain of our subsidiaries' ability to engage in sale and leaseback transactions.
A summary of long-term debt was as follows:
In millions Interest Rate September 27,
2020		 December 31,
2019
Long-term debt    
Senior notes, due 2023(1)
3.65% $ 500  $ 500 
Senior notes, due 2025 0.75% 500  — 
Debentures, due 2027 6.75% 58  58 
Debentures, due 2028 7.125% 250  250 
Senior notes, due 2030 1.50% 850  — 
Senior notes, due 2043 4.875% 500  500 
Senior notes, due 2050 2.60% 650  — 
Debentures, due 2098(2)
5.65% 165  165 
Other debt 130  59 
Unamortized discount and deferred issuance costs (73) (50)
Fair value adjustments due to hedge on indebtedness 50  35 
Finance leases 87  90 
Total long-term debt 3,667  1,607 
Less: Current maturities of long-term debt 58  31 
Long-term debt $ 3,609  $ 1,576 
(1) In June and July 2020, we settled our February 2014 interest rate swap. See "Interest Rate Risk" below for additional information.
(2) The effective interest rate 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 $ 38  $ 51  $ 29  $ 525  $ 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 $17 million and net loss of $52 million in "Other comprehensive income" for the three and nine months ended September 27, 2020, respectively.
In June and July of 2020, we settled 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 $24 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 September 27,
2020		 December 31,
2019
Fair value of total debt (1)
$ 4,532  $ 2,706 
Carrying value of total debt 4,112  2,367 
(1) The fair value of debt is derived from Level 2 inputs.