Long-Term Debt and Other Financing Arrangements

12 Months Ended

May 31, 2024

Debt and Lease Obligation [Abstract]

Long-term Debt and Other Financing Arrangements

NOTE 6: LONG-TERM DEBT AND OTHER FINANCING ARRANGEMENTS

The components of long-term debt (net of discounts and debt issuance costs), along with maturity dates for the years subsequent to May 31, 2024, are as follows (in millions):

				May 31,
				2024		2023
	Interest Rate %		Maturity
Senior secured debt:
		1.875	2034	$	780	$	831
Senior unsecured debt:
		3.25	2026		748		748
		3.40	2028		498		497
		4.20	2029		398		398
	3.10-4.25		2030		1,739		1,737
		2.40	2031		992		991
		4.90	2034		497		496
		3.90	2035		495		495
		3.25	2041		740		740
	3.875-4.10		2043		986		985
		5.10	2044		743		743
		4.10	2045		642		641
	4.55-4.75		2046		2,464		2,463
		4.40	2047		737		736
		4.05	2048		987		987
		4.95	2049		836		836
		5.25	2050		1,227		1,226
		4.50	2065		246		246
		7.60	2098		237		237
Euro senior unsecured debt:
		0.45	2026		542		537
		1.625	2027		1,353		1,341
		0.45	2029		647		641
		1.30	2032		539		534
		0.95	2033		699		693
Total senior unsecured debt					18,992		18,948
Finance lease obligations					431		800
					20,203		20,579
Less current portion					68		126
				$	20,135	$	20,453

Interest on our U.S. dollar fixed-rate notes is paid semi-annually. Interest on our euro fixed-rate notes is paid annually. The weighted-average interest rate on long-term debt was 3.5% as of May 31, 2024. Long-term debt, including current maturities and exclusive of finance leases, had estimated fair values of $17.5 billion at May 31, 2024 and $17.5 billion at May 31, 2023. The estimated fair values were determined based on quoted market prices and the current rates offered for debt with similar terms and maturities. The fair value of our long-term debt is classified as Level 2 within the fair value hierarchy. This classification is defined as a fair value determined using market-based inputs other than quoted prices that are observable for the liability, either directly or indirectly.

We have a shelf registration statement filed with the SEC that allows us to sell, in one or more future offerings, any combination of our unsecured debt securities and common stock and allows pass-through trusts formed by FedEx Express to sell, in one or more future offerings, pass-through certificates.

FedEx Express has issued $970 million of Pass-Through Certificates, Series 2020-1AA (the “Certificates”) with a fixed interest rate of 1.875% due in February 2034 utilizing pass-through trusts. The Certificates are secured by 19 Boeing aircraft with a net book value of $1.7 billion at May 31, 2024. The payment obligations of FedEx Express in respect of the Certificates are fully and unconditionally guaranteed by FedEx.

The following table sets forth the future scheduled principal payments due by fiscal year on our long-term debt (in millions):

	Debt Principal
2025	$	52
2026		1,344
2027		1,409
2028		552
2029		1,103
Thereafter		15,517
Subtotal		19,977
Discount and debt issuance costs		(205	)
Total debt	$	19,772

On March 15, 2024, we replaced our $2.0 billion five-year credit agreement (the “Old Five-Year Credit Agreement”) and our $1.5 billion three-year credit agreement (the “Old Three-Year Credit Agreement” and together with the Old Five-Year Credit Agreement, the “Old Credit Agreements”) with a $1.75 billion three-year credit agreement (the “New Three-Year Credit Agreement”) and a $1.75 billion five-year credit agreement (the “New Five-Year Credit Agreement” and together with the New Three-Year Credit Agreement, the “New Credit Agreements”). The New Three-Year Credit Agreement and the New Five-Year Credit Agreement expire in March 2027 and March 2029, respectively, and each has a $125 million letter of credit sublimit. The New Credit Agreements are available to finance our operations and other cash flow needs. As of May 31, 2024, no amounts were outstanding under the New Credit Agreements, no commercial paper was outstanding, and we had $250 million of the letter of credit sublimit unused under the New Credit Agreements. Outstanding commercial paper reduces the amount available to borrow under the New Credit Agreements.

The New Credit Agreements contain a financial covenant requiring us to maintain a ratio of debt to consolidated earnings (excluding noncash retirement plans mark-to-market adjustments, noncash pension service costs, noncash asset impairment charges, business optimization and restructuring expenses, and pro forma cost savings and synergies associated with an acquisition) before interest, taxes, depreciation, and amortization (“adjusted EBITDA”) of not more than 3.5 to 1.0, calculated as of the last day of each fiscal quarter on a rolling four-quarters basis. The ratio of our debt to adjusted EBITDA was 1.8 to 1.0 at May 31, 2024.

The New Credit Agreements amended the financial covenant included in the Old Credit Agreements to (i) net unrestricted cash and cash equivalents up to $500 million from the definition of debt and (ii) add back business optimization and restructuring expenses and pro forma cost savings and synergies associated with an acquisition to adjusted EBITDA. The aggregate amount of adjustments for business optimization and restructuring expenses and pro forma cost savings and synergies associated with an acquisition may not exceed 10% of adjusted EBITDA (calculated after giving effect to any such addback and such cap and all other permitted addbacks and adjustments) in any period. Additionally, following the consummation of an acquisition for which the aggregate cash consideration is at least $250 million, FedEx may elect to increase the ratio to 4.0 to 1.0 with respect to the last day of the fiscal quarter during which such acquisition is consummated and the last day of each of the immediately following three consecutive fiscal quarters, provided that there must be at least two consecutive fiscal quarters between such elections during which the ratio is 3.5 to 1.0.

The financial covenant discussed above is the only significant restrictive covenant in the New Credit Agreements. The New Credit Agreements contain other customary covenants that do not, individually or in the aggregate, materially restrict the conduct of our

business. We are in compliance with the financial covenant and all other covenants in the New Credit Agreements and do not expect the covenants to affect our operations, including our liquidity or expected funding needs. If we failed to comply with the financial covenant or any other covenants in the New Credit Agreements, our access to financing could become limited. Our commercial paper program is backed by unused commitments under the New Credit Agreements.