Debt and Finance Lease Obligations

12 Months Ended

Dec. 31, 2019

Debt and Lease Obligation [Abstract]

DEBT AND FINANCE LEASE OBLIGATIONS

9.

DEBT AND FINANCE LEASE OBLIGATIONS

Debt, at stated values, and finance lease obligations consisted of the following (in millions):

	Final Maturity	December 31,
		2019			2018
Credit facilities:
Valero Revolver	2024	$	—		$	—
IEnova Revolver	2028	348			109
Canadian Revolver	2020	—			—
Accounts receivable sales facility	2020	100			100
Public debt:
Valero Senior Notes
6.625%	2037	1,500			1,500
3.4%	2026	1,250			1,250
4.0%	2029	1,000			—
6.125%	2020	—			850
4.35%	2028	750			750
7.5%	2032	750			750
4.9%	2045	650			650
3.65%	2025	600			600
10.5%	2039	250			250
8.75%	2030	200			200
7.45%	2097	100			100
6.75%	2037	24			24
VLP Senior Notes
4.375%	2026	500			500
4.5%	2028	500			500
Gulf Opportunity Zone Revenue Bonds, Series 2010, 4.0%	2040	300			300
Debenture, 7.65%	2026	100			100
Other debt	Various	47			50
Net unamortized debt issuance costs and other		(88		)	(80		)
Total debt		8,881			8,503
Finance lease obligations (see Note 5)		791			606
Total debt and finance lease obligations		9,672			9,109
Less: Current portion		494			238
Debt and finance lease obligations, less current portion		$	9,178		$	8,871

Credit Facilities

Valero Revolver

In March 2019, we amended our revolving credit facility (the Valero Revolver) to increase the borrowing capacity from $3 billion to $4 billion and to extend the maturity date from November 2020 to March 2024. The Valero Revolver also provides for the issuance of letters of credit of up to $2.4 billion.

Outstanding borrowings under the Valero Revolver bear interest, at our option, at either (i) the adjusted LIBO rate (as defined in the Valero Revolver) for the applicable interest period in effect from time to time plus the applicable margin or (ii) the alternate base rate (as defined in the Valero Revolver) plus the applicable margin. The Valero Revolver also requires payments for customary fees, including facility fees, letter of credit participation fees, and administrative agent fees. The interest rate and facility fees under the Valero Revolver are subject to adjustment based upon the credit ratings assigned to our senior unsecured debt.

We had no borrowings or repayments under the Valero Revolver during the years ended December 31, 2019, 2018, and 2017.

VLP Revolver

As of December 31, 2018, VLP had a $750 million senior unsecured revolving credit facility (the VLP Revolver) with a group of lenders that was scheduled to mature in November 2020. However, on January 10, 2019, in connection with the completion of the Merger Transaction as described in Note 2, the VLP Revolver was terminated.

During the year ended December 31, 2018, VLP repaid the outstanding balance of $410 million on the VLP Revolver using proceeds from its public offering of $500 million 4.5 percent Senior Notes as described in “Public Debt” below. During the year ended December 31, 2017, VLP borrowed $380 million under the revolver and made no repayments.

IEnova Revolver

In February 2018, Central Mexico Terminals (as described in Note 12) entered into a combined $340 million unsecured revolving credit facility (IEnova Revolver) with IEnova (defined in Note 12) that matures in February 2028. In November 2019, the IEnova Revolver was increased to $491 million. IEnova may terminate this revolver at any time and demand repayment of all outstanding amounts; therefore, all outstanding borrowings are reflected in current portion of debt. The IEnova Revolver is available only to the operations of Central Mexico Terminals, and the creditors of Central Mexico Terminals do not have recourse against us.

Outstanding borrowings under this revolver bear interest at the three-month LIBO rate for the applicable interest period in effect from time to time plus the applicable margin. The interest rate under this revolver is subject to adjustment, with agreement by both parties, based upon changes in market conditions. As of December 31, 2019 and 2018, the variable rate was 5.749 percent and 6.046 percent, respectively.

During the year ended December 31, 2019 and 2018, Central Mexico Terminals borrowed $239 million and $109 million, respectively, and had no repayments under this revolver.

Canadian Revolver

In November 2019, one of our Canadian subsidiaries amended its committed revolving credit facility (the Canadian Revolver) of C$150 million, under which it may borrow and obtain letters of credit, to extend the maturity date from November 2019 to November 2020.

We had no borrowings or repayments under this revolver during the years ended December 31, 2019, 2018, and 2017.

Accounts Receivable Sales Facility

We have an accounts receivable sales facility with a group of third-party entities and financial institutions to sell up to $1.3 billion of eligible trade receivables on a revolving basis. In July 2019, we amended our agreement to extend the maturity date to July 2020. Under this program, one of our marketing subsidiaries (Valero Marketing) sells eligible receivables, without recourse, to another of our subsidiaries (Valero Capital), whereupon the receivables are no longer owned by Valero Marketing. Valero Capital, in turn, sells an undivided percentage ownership interest in the eligible receivables, without recourse, to the third-party entities and financial institutions. To the extent that Valero Capital retains an ownership interest in the receivables it has purchased from Valero Marketing, such interest is included in our financial statements solely as a result of the consolidation of the financial statements of Valero Capital with those of Valero Energy Corporation; the receivables are not available to satisfy the claims of the creditors of Valero Marketing or Valero Energy Corporation.

As of December 31, 2019 and 2018, $2.2 billion and $1.8 billion, respectively, of our accounts receivable composed the designated pool of accounts receivable included in the program. All amounts outstanding under the accounts receivable sales facility are reflected as debt on our balance sheets and proceeds and repayments are reflected as cash flows from financing activities on the statements of cash flows. As of December 31, 2019 and 2018, the variable interest rate on the accounts receivable sales facility was 2.3866 percent and 3.0618 percent, respectively. During the year ended December 31, 2019, we sold and repaid $900 million of eligible receivables under the accounts receivable sales facility. During the years ended December 31, 2018 and 2017, we had no proceeds from or repayments under the accounts receivable sales facility.

Summary of Credit Facilities

We had outstanding borrowings, letters of credit issued, and availability under our credit facilities as follows (amounts in millions and currency in U.S. dollars, except as noted):

				December 31, 2019
	Facility Amount		Maturity Date	Outstanding Borrowings		Letters of Credit Issued (a)		Availability
Committed facilities:
Valero Revolver	$	4,000	March 2024	$	—	$	34	$	3,966
Canadian Revolver	C$	150	November 2020	C$	—	C$	5	C$	145
Accounts receivable sales facility	$	1,300	July 2020	$	100	n/a		$	1,200
Letter of credit facility (b)	$	50	November 2020	n/a		$	—	$	50
Committed facility of VIE (c):
IEnova Revolver	$	491	February 2028	$	348	n/a		$	143
Uncommitted facilities:
Letter of credit facilities	n/a		n/a	n/a		$	121	n/a

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(a) Letters of credit issued as of December 31, 2019 expire at various times in 2020 through 2021.

(b) The letter of credit facility was amended to reduce the facility from $100 million to $50 million and to extend the maturity date from November 2019 to November 2020.

(c) Creditors of our VIE do not have recourse against us.

We are charged letter of credit issuance fees under our various uncommitted short-term bank credit facilities. These uncommitted credit facilities have no commitment fees or compensating balance requirements.

Public Debt

During the year ended December 31, 2019, the following activity occurred:

• We issued $1.0 billion of 4.00 percent Senior Notes due April 1, 2029 (4.00 percent Senior Notes). Proceeds from this debt issuance totaled $992 million before deducting the underwriting discount and other debt issuance costs. The proceeds were used to redeem our 6.125 percent Senior Notes due February 1, 2020 (6.125 percent Senior Notes) for $871 million, or 102.48 percent of stated value, which includes an early redemption fee of $21 million that is reflected in “other income, net” in our statement of income for the year ended December 31, 2019.

• In connection with the completion of the Merger Transaction as described in Note 2, Valero entered into a guarantee agreement to fully and unconditionally guarantee the prompt payment, when due, of any amount owed to the holders of VLP’s 4.375 percent Senior Notes due December 15, 2026 and 4.5 percent Senior Notes due March 15, 2028. See Note 21 for condensed consolidating financial statements.

During the year ended December 31, 2018, the following activity occurred:

• We issued $750 million of 4.35 percent Senior Notes due June 1, 2028. Proceeds from this debt issuance totaled $749 million before deducting the underwriting discount and other debt issuance costs. The proceeds were used to redeem our 9.375 percent Senior Notes due March 15, 2019 for $787 million, or 104.9 percent of stated value, which includes an early redemption fee of $37 million that is reflected in “other income, net” in our statement of income for the year ended December 31, 2018.

• VLP issued $500 million of 4.5 percent Senior Notes due March 15, 2028. Proceeds from this debt issuance totaled $498 million before deducting the underwriting discount and other debt issuance costs. The proceeds were available only to the operations of VLP and were used to repay the outstanding balance of $410 million on the VLP Revolver and $85 million on its notes payable to us, which is eliminated in consolidation.

During the year ended December 31, 2017, there was no issuance or redemption activity related to our public debt.

Other Debt

During the year ended December 31, 2018, we retired $137 million of debt assumed in connection with the Peru Acquisition with available cash on hand.

Other Disclosures

“Interest and debt expense, net of capitalized interest” is comprised as follows (in millions):

	Year Ended December 31,
	2019		2018		2017
Interest and debt expense	$	544	$	557	$	539
Less: Capitalized interest	90		87		71
Interest and debt expense, net of capitalized interest	$	454	$	470	$	468

Our credit facilities and other debt arrangements contain various customary restrictive covenants, including cross-default and cross-acceleration clauses.

Principal maturities for our debt obligations as of December 31, 2019 were as follows (in millions):

2020 (a)	$	453
2021	17
2022	6
2023	19
2024	—
Thereafter	8,474
Net unamortized debt issuance costs and other	(88		)
Total debt	$	8,881

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(a)

As of December 31, 2019, our debt obligations due in 2020 include $348 million associated with borrowings under the IEnova Revolver.