Annual report pursuant to Section 13 and 15(d)

DEBT

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DEBT
 12 Months Ended
Dec. 31, 2023
Debt Disclosure [Abstract]  
DEBT
NOTE 13. DEBT
Loans Payable
Loans payable at December 31, 2023 and 2022 were $280 million and $210 million, respectively, and consisted primarily of notes payable to financial institutions. The weighted-average interest rate for notes payable, bank overdrafts and current maturities of long-term debt at December 31 was as follows:
2023 2022
Weighted-average interest rate 3.31  % 4.02  %
Commercial Paper
Our committed credit facilities provide access up to $4.0 billion of unsecured, short-term promissory notes (commercial paper) pursuant to the Board of Directors (the Board) authorized commercial paper programs. These 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 acquisitions and general corporate purposes. We had $1.496 billion and $2.574 billion in outstanding borrowings under our commercial paper programs at December 31, 2023 and 2022, respectively. The weighted-average interest rate for commercial paper at December 31 was as follows:
2023 2022
Weighted-average interest rate 5.43  % 4.27  %
Revolving Credit Facilities
On June 5, 2023, we entered into an amended and restated 364-day credit agreement that allows us to borrow up to $2.0 billion of unsecured funds at any time prior to June 3, 2024. This credit agreement amended and restated the prior $1.5 billion 364-day credit facility that was scheduled to mature on August 16, 2023. In connection with the 364-day credit agreement, effective June 5, 2023, we terminated our $500 million incremental 364-day credit agreement dated August 17, 2022.
On August 18, 2021, we entered into an amended and restated 5-year revolving credit agreement, which allows us to borrow up to $2 billion of unsecured funds at any time prior to August 18, 2026. In connection with the new credit agreements, on August 17, 2022, we entered into an amendment to our $2.0 billion five-year facility to replace LIBOR with Secured Overnight Financing Rate (SOFR) as an interest rate benchmark and to make other conforming changes to interest rate determinations. Amounts payable under our revolving credit facility 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 SOFR rate loans was 0.85 percent per annum. Advances under the facility may be prepaid without premium or penalty, subject to customary breakage costs.
Our committed credit facilities provide access up to $4.0 billion, including our $2.0 billion 364-day facility that expires June 3, 2024, and our $2.0 billion five-year facility that expires on August 18, 2026. We intend to 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 general corporate purposes. Our 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 December 31, 2023, we were in compliance with the financial debt covenants. There were no outstanding borrowings under these facilities at December 31, 2023 and December 31, 2022.
The total combined borrowing capacity under the revolving credit facilities and commercial programs should not exceed $4.0 billion. At December 31, 2023, our $1.5 billion of commercial paper outstanding effectively reduced the $4.0 billion available capacity under our revolving credit facilities to $2.5 billion.
At December 31, 2023, we also had an additional $393 million available for borrowings under our international and other domestic credit facilities.
At December 31, 2023, Atmus had no outstanding borrowings under its $400 million revolving credit facility. See "Atmus Credit Agreement" section below for additional details.
Long-term Debt
A summary of long-term debt was as follows:
December 31,
In millions Interest Rate 2023 2022
Long-term debt
Senior notes, due 2023 3.65% $ —  $ 500 
Hydrogenics promissory notes, due 2024 and 2025 (1)
—% 160  — 
Term loan, due 2025 (2)(3)
Variable 1,150  1,550 
Senior notes, due 2025 (4)
0.75% 500  500 
Atmus term loan, due 2027 (5)
Variable 600  — 
Debentures, due 2027 6.75% 58  58 
Debentures, due 2028 7.125% 250  250 
Senior notes, due 2030 (4)
1.50% 850  850 
Senior notes, due 2043 4.875% 500  500 
Senior notes, due 2050 2.60% 650  650 
Debentures, due 2098 (6)
5.65% 165  165 
Other debt 94  121 
Unamortized discount and deferred issuance costs (72) (64)
Fair value adjustments due to hedge on indebtedness (96) (122)
Finance leases 111  113 
Total long-term debt 4,920  5,071 
Less: Current maturities of long-term debt 118  573 
Long-term debt $ 4,802  $ 4,498 
(1) See NOTE 24, "ACQUISITIONS," for additional information.
(2) During 2023, we paid down $400 million of the term loan.
(3) In September 2023, we entered into a series of interest rate swaps in order to trade a portion of the floating rate into fixed rate. See "Interest Rate Risk" in NOTE 21, "DERIVATIVES," for additional information.
(4) In 2021, we entered into a series of interest rate swaps to effectively convert from a fixed rate to floating rate. See "Interest Rate Risk" in NOTE 21, "DERIVATIVES," for additional information.
(5) See "Atmus Credit Agreement" section below for additional information.
(6) The effective interest rate is 7.48 percent.
Principal payments required on long-term debt during the next five years are as follows:
In millions 2024 2025 2026 2027 2028
Principal payments $ 118  $ 1,797  $ 67  $ 614  $ 266 
On July 13, 2022, we entered into a loan agreement under which we may obtain delayed-draw loans in an amount up to $2.0 billion in the aggregate prior to October 13, 2022. We drew down the entire $2.0 billion balance on August 2, 2022, to help fund the acquisition of Meritor. The interest rate is based on SOFR for the one-month interest period plus the relevant spread. The loan will mature on August 1, 2025. As of December 31, 2023 we repaid $850 million of this term loan. The agreement contains customary events of default and financial and other covenants, including maintaining a net debt to capital ratio of no more than 0.65 to 1.0.
The $250 million 7.125 percent debentures and $165 million 5.65 percent debentures are unsecured and are not subject to any sinking fund requirements. We can redeem these debentures at any time prior to maturity at the greater of par plus accrued interest or an amount designed to ensure that the debenture holders are not penalized by the early redemption.
Our debt agreements contain several restrictive covenants. The most restrictive of these covenants applies to our revolving credit facility which will upon default, among other things, limit our ability to incur additional debt or issue preferred stock, enter into sale-leaseback transactions, sell or create liens on our assets, make investments and merge or consolidate with any other entity. At December 31, 2023, we were in compliance with all of the financial debt covenants under our borrowing agreements.
Shelf Registration
As a well-known seasoned issuer, we filed an automatic shelf registration for an undetermined amount of debt and equity securities with the Securities and Exchange Commission (SEC) on February 8, 2022. Under this shelf registration we may offer, from time to time, debt securities, common stock, preferred and preference stock, depositary shares, warrants, stock purchase contracts and stock purchase units. Our current shelf is scheduled to expire in February 2025.
Interest Expense
For the years ended December 31, 2023, 2022 and 2021, total interest incurred was $383 million, $204 million and $113 million, respectively, and interest capitalized was $8 million, $5 million and $2 million, respectively.
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:
December 31,
In millions 2023 2022
Fair values of total debt (1)
$ 6,375  $ 7,400 
Carrying value of total debt 6,696  7,855 
(1) The fair value of debt is derived from Level 2 input measures.
Atmus Credit Agreement
On February 15, 2023, certain of our subsidiaries entered into an amendment to the $1.0 billion credit agreement (Credit Agreement), consisting of a $400 million revolving credit facility and a $600 million term loan facility, in anticipation of the separation of Atmus, extending the Credit Agreement termination date from March 30, 2023, to June 30, 2023. On May 26, 2023, Atmus drew down the entire $600 million term loan facility and borrowed $50 million under the revolving credit facility. Borrowings under the Credit Agreement mature in September 2027 (with quarterly payments on the term loan beginning in September 2024) and bear interest at varying rates, depending on the type of loan and, in some cases, the rates of designated benchmarks and the applicable borrower’s election. Generally, U.S. dollar-denominated loans bear interest at adjusted-term (SOFR) (which includes a 0.10 percent credit spread adjustment to term SOFR) for the applicable interest period plus a rate ranging from 1.125 percent to 1.75 percent. The Credit Agreement contains customary events of default and financial and other covenants, including maintaining a net leverage ratio of 4.0 to 1.0 and a minimum interest coverage ratio of 3.0 to 1.0. At December 31, 2023, there were no outstanding borrowings under the revolving credit facility and $600 million outstanding under the term loan facility. See NOTE 23, "FORMATION OF ATMUS AND IPO," for additional information