Debt and Credit Agreements

12 Months Ended

Dec. 31, 2021

Debt Disclosure [Abstract]

Debt and Credit Agreements

13. Debt and Credit Agreements

SHORT-TERM DEBT

As of December 31, 2021 and 2020, total short-term debt was $346 million and $302 million, respectively. As of December 31, 2021, short-term debt consisted mainly of a $332 million (SEK 3,000 million) loan from Swedish Export Credit Corporation.

The Company’s subsidiaries have credit agreements, principally in the form of overdraft facilities with several local banks. Total available short-term facilities as of December 31, 2021, excluding commercial paper facilities as described below, amounted to $428 million, of which approximately $14 million was utilized. The weighted average interest rate on total short-term debt outstanding at December 31, 2021 and 2020, excluding the short-term portion of long-term debt, was 2% and 3%, respectively.

LONG-TERM DEBT

As of December 31, 2021 and 2020, total long-term debt was $1,662 million and $2,110 million, respectively.

In June 2020 the Company utilized its new SEK 6,000 million facility with Swedish Export Credit Corporation which was signed in May 2020. The SEK 6,000 million facility was utilized in two different loans. One SEK 3,000 million loan maturing in 2022 carrying a floating interest rate of 3M STIBOR +1.35% and one SEK 3,000 million loan maturing in 2025 carrying a floating interest rate of 3M STIBOR +1.85%.

In June 2018, the Company also issued €500 million of 5-year notes in the Eurobond market. The notes carry a coupon of 0.75%.

In 2014, the Company issued long-term debt securities in a U.S. Private Placement. As of December 31, 2021 the total long-term debt outstanding from the 2014 issuance of $767 million consist of: $297 million aggregate principal amount of 10-year senior notes with an interest rate of 4.09%; $285 million aggregate principal amount of 12-year senior notes with an interest rate of 4.24%; and $185 million aggregate principal amount of 15-year senior notes with an interest rate of 4.44%.

CREDIT FACILITIES

In July 2016, the Company signed a $1,100 million senior unsecured revolving credit facility with 14 banks. The term of the facility was 5 years with two one-year extension options. The Company has utilized these extension options and extended the maturity to July 2023. The Company pays a commitment fee on the undrawn amount. The commitment fee is 35% of the applicable margin. The applicable margin is related to the Company’s credit rating. Given the Company’s current credit rating of BBB from S&P Global Ratings, the applicable margin is 0.375%. As of December 31, 2021, the facility was not utilized.

The Company has a €3,000 million Euro Medium Term Note Program in place for being able to issue notes to be traded on the Global Exchange Market of Euronext Dublin. At December 31, 2021, no notes had been issued under this program.

The Company has two commercial paper programs: one SEK 7 billion (approx. $774 million) Swedish program and a $1 billion U.S. program. At December 31, 2021 no commercial papers have been issued under these programs.

The Company is not subject to any financial covenants, i.e. performance related restrictions, in any of its significant long-term borrowings or commitments.

CREDIT RISK

In the Company’s financial operations, credit risk arises in connection with cash deposits with banks and when entering into forward exchange agreements, swap contracts or other financial instruments. In order to reduce this risk, deposits and financial instruments are only entered with a limited number of banks up to a calculated risk amount of $200 million per bank for banks rated A- or above and up to $50 million for banks rated BBB+. The policy of the Company is to work with banks that have a strong credit rating and that participate in the Company’s financing. In addition to this, deposits of up to an aggregate amount of $2 billion can be placed in U.S. and Swedish government paper and in certain AAA rated money market funds. As of December 31, 2021, the Company had placed $579 million in money market funds.

The table below shows debt maturity as cash flow. For a description of hedging instruments used as part of debt management, see the Financial Instruments section of Note 2 and Note 4.

DEBT PROFILE

													Total
PRINCIPAL AMOUNT BY EXPECTED MATURITY (dollars in millions)	2022		2023		2024		2025		2026		Thereafter		long- term		Total
Bonds	$	—	$	565	$	297	$	—	$	285	$	185	$	1,332	$	1,332
Loans		332		—		—		332		—		—		332		664
Commercial papers		—		—		—		—		—		—		—		—
Other short-term debt		14		—		—		—		—		—		—		14
Total principal amount	$	346	$	565	$	297	$	332	$	285	$	185	$	1,664	$	2,010	1)

1) The difference between reported total debt and total principal amount is mainly related to capitalized debt issuance costs.