Quarterly report pursuant to Section 13 or 15(d)

DEBT

v3.21.2
DEBT
 9 Months Ended
Oct. 03, 2021
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 October 3,
2021		 December 31,
2020
Loans payable (1)
$ 85  $ 169 
Commercial paper 200 
(2)
 323 
(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 0.14 percent at October 3, 2021 and included $200 million of borrowings under the U.S. program.
(3) The weighted-average interest rate, inclusive of all brokerage fees, was negative 0.01 percent at December 31, 2020 and included $123 million of borrowings under the Europe program that were negative 0.34 percent and $200 million of borrowings under the U.S. program at 0.19 percent.
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.
Revolving Credit Facilities
On August 18, 2021, we entered into an amended and restated 5-year revolving credit agreement with a syndicate of lenders. The amended and restated credit agreement provides us with a $2 billion senior unsecured revolving credit facility until August 18, 2026. This credit agreement replaces the prior $2 billion 5-year credit agreement that would have matured on August 22, 2023. Amounts payable under our revolving credit facility will rank pro rata with all of our unsecured, unsubordinated indebtedness. Up to $300 million under this credit facility is available for swingline loans. Based on our current long-term debt ratings, the applicable margin on LIBOR rate loans was 0.75 percent per annum as of October 3, 2021. Advances under the facility may be prepaid without premium or penalty, subject to customary breakage costs.
On August 18, 2021, 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 17, 2022. This credit agreement amended and restated the prior $1.5 billion 364-day credit facility that matured on August 18, 2021.
Both credit agreements include various covenants, including, among others, maintaining a net debt to total capital ratio of no more than 0.65 to 1.0. At October 3, 2021, we were in compliance with these covenants. These revolving credit facilities are maintained primarily to provide backup liquidity for our commercial paper borrowings and for general corporate purposes. We intend to maintain credit facilities at the current or higher aggregate amounts by renewing or replacing these facilities at or before expiration. There were no outstanding borrowings under these facilities at October 3, 2021 and December 31, 2020.
At October 3, 2021, the $200 million of outstanding commercial paper effectively reduced the $3.5 billion of revolving credit capacity to $3.3 billion.
At October 3, 2021, we also had an additional $268 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 October 3,
2021		 December 31,
2020
Long-term debt    
Senior notes, due 2023 3.65% $ 500  $ 500 
Senior notes, due 2025(1)
0.75% 500  500 
Debentures, due 2027 6.75% 58  58 
Debentures, due 2028 7.125% 250  250 
Senior notes, due 2030 1.50% 850  850 
Senior notes, due 2043 4.875% 500  500 
Senior notes, due 2050 2.60% 650  650 
Debentures, due 2098(2)
5.65% 165  165 
Other debt 124  132 
Unamortized discount and deferred issuance costs (68) (72)
Fair value adjustments due to hedge on indebtedness 39  48 
Finance leases 89  91 
Total long-term debt 3,657  3,672 
Less: Current maturities of long-term debt 55  62 
Long-term debt $ 3,602  $ 3,610 
(1) In the third quarter of 2021, we entered into a series of interest rate swaps to effectively convert from a fixed rate to floating rate. 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 2021 2022 2023 2024 2025
Principal payments $ 16  $ 58  $ 536  $ 31  $ 507 
Interest Rate Risk
In the third quarter of 2021, we entered into a series of interest rate swaps to effectively convert $400 million of our August 2020, $500 million senior notes, due in 2025, from a fixed rate of 0.75 percent to a floating rate equal to LIBOR plus a spread. The swaps were designated, and will be accounted for, as fair value hedges. The gain or loss on these derivative instruments, as well as the offsetting gain or loss on the hedged item attributable to the hedged risk, are recognized in current income as "Interest expense." The net swap settlements that accrue each period are also reported in the Condensed Consolidated Financial Statements as "Interest expense." The loss on the interest rate swaps was less than $1 million and the offsetting gain on borrowing was less than $1 million for the three and nine month periods ended October 3, 2021.
We have 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.
The following table summarizes the gains and (losses), net of tax, recognized in "Other comprehensive income":
In millions Three months ended Nine months ended
Type of Swap October 3,
2021		 September 27,
2020		 October 3,
2021		 September 27,
2020
Interest rate locks $ —  $ 17  $ 28  $ (52)
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 October 3,
2021		 December 31,
2020
Fair value of total debt (1)
$ 4,285  $ 4,665 
Carrying value of total debt 3,942  4,164 
(1) The fair value of debt is derived from Level 2 input measures.