Note 14 – Debt, Banking Arrangements, and Leases

Long-Term Debt



	December 31,
	2015		2014
	(Millions)
Unsecured:
Transco:
6.4% Notes due 2016 (2)	$	200	$	200
6.05% Notes due 2018	250		250
7.08% Debentures due 2026	8		8
7.25% Debentures due 2026	200		200
5.4% Notes due 2041	375		375
4.45% Notes due 2042	400		400
Northwest Pipeline:
7% Notes due 2016	175		175
5.95% Notes due 2017	185		185
6.05% Notes due 2018	250		250
7.125% Debentures due 2025	85		85
WPZ:
3.8% Notes due 2015 (1)	—		750
7.25% Notes due 2017	600		600
5.25% Notes due 2020	1,500		1,500
4.125% Notes due 2020	600		600
4% Notes due 2021	500		500
5.875% Notes due 2021	—		750
3.6% Notes due 2022	1,250		—
3.35% Notes due 2022	750		750
6.125% Notes due 2022	750		750
4.5% Notes due 2023	600		600
4.875% Notes due 2023	1,400		1,400
4.3% Notes due 2024	1,000		1,000
4.875% Notes due 2024	750		750
3.9% Notes due 2025	750		750
4.0% Notes due 2025	750		—



	December 31,
	2015			2014
	(Millions)
6.3% Notes due 2040	$	1,250		$	1,250
5.8% Notes due 2043	400			400
5.4% Notes due 2044	500			500
4.9% Notes due 2045	500			500
5.1% Notes due 2045	1,000			—
Term Loan, variable interest rate, due 2018	850			—
Credit facility loans	1,310			640
WMB:
7.875% Notes due 2021	371			371
3.7% Notes due 2023	850			850
4.55% Notes due 2024	1,250			1,250
7.5% Debentures due 2031	339			339
7.75% Notes due 2031	252			252
8.75% Notes due 2032	445			445
5.75% Notes due 2044	650			650
Various — 5.5% to 10.25% Notes and Debentures due 2019 to 2033	55			55
Credit facility loans	650			370
Capital lease obligations	1			5
Debt issuance costs	(123		)	(108		)
Net unamortized debt premium (discount)	110			187
Total long-term debt, including current portion	23,988			20,784
Long-term debt due within one year	(176		)	(4		)
Long-term debt	$	23,812		$	20,780

___________


(1)	Presented as long-term debt at December 31, 2014, due to WPZ's intent and ability to refinance.


(2)	Presented as long-term debt at December 31, 2015, due to Transco’s intent and ability to refinance.

Certain of our debt agreements contain covenants that restrict or limit, among other things, our ability to create liens supporting indebtedness, sell assets, and incur additional debt. Default of these agreements could also restrict our ability to make certain distributions or repurchase equity.

The following table presents aggregate minimum maturities of long-term debt, excluding net unamortized debt premium (discount), debt issuance costs, and capital lease obligations, for each of the next five years:



	December 31, 2015
	(Millions)
2016	$	175
2017	785
2018	1,350
2019	32
2020	2,121

Provisions concerning ACMP long-term debt

Certain long-term debt originally issued by ACMP totaling $2.9 billion has provisions that would require WPZ to make an offer to repurchase such notes at 101 percent of the principle amount should WPZ’s credit be downgraded by either Moody’s Investor Service or Standard and Poor’s within a period of ninety days following the completion of the proposed ETC Merger.

Issuances and retirements

On January 22, 2016, Transco issued $1 billion of 7.85 percent senior unsecured notes due 2026 to investors in a private debt placement. Transco intends to use the net proceeds from the offering to repay debt and to fund capital expenditures.

In December 2015, WPZ borrowed $850 million on a variable interest rate loan with certain lenders due 2018. At December 31, 2015 the interest rate was 1.85 percent. WPZ used the proceeds for working capital, capital expenditures, and for general partnership purposes.

On April 15, 2015, WPZ paid $783 million, including a redemption premium, to early retire $750 million of 5.875 percent senior notes due 2021 with a carrying value of $797 million.

On March 3, 2015, WPZ completed a public offering of $1.25 billion of 3.6 percent senior unsecured notes due 2022, $750 million of 4 percent senior unsecured notes due 2025, and $1 billion of 5.1 percent senior unsecured notes due 2045. WPZ used the net proceeds to repay amounts outstanding under its commercial paper program and credit facility, to fund capital expenditures, and for general partnership purposes.

WPZ retired $750 million of 3.8 percent senior unsecured notes that matured on February 15, 2015.

On June 27, 2014, Pre-merger WPZ completed a public offering of $750 million of 3.9 percent senior unsecured notes due 2025 and $500 million of 4.9 percent senior unsecured notes due 2045. Pre-merger WPZ used the net proceeds to repay amounts outstanding under its commercial paper program, to fund capital expenditures, and for general partnership purposes.

On June 24, 2014, we completed a public offering of $1.25 billion of 4.55 percent senior unsecured notes due 2024 and $650 million of 5.75 percent unsecured notes due 2044. We used the net proceeds to finance a portion of the ACMP Acquisition. (See Note 2 – Acquisitions.)

On March 4, 2014, Pre-merger WPZ completed a public offering of $1 billion of 4.3 percent senior unsecured notes due 2024 and $500 million of 5.4 percent senior unsecured notes due 2044. Pre-merger WPZ used the net proceeds to repay amounts outstanding under its commercial paper program, to fund capital expenditures, and for general partnership purposes.

Credit Facilities



	December 31, 2015
	Available		Outstanding
	(Millions)
WMB
Long-term credit facility	$	1,500	$	650
Letters of credit under certain bilateral bank agreements			14
WPZ
Long-term credit facility (1)	3,500		1,310
Letters of credit under certain bilateral bank agreements			2
Short-term credit facility	150		—

________________


(1)	In managing our available liquidity, we do not expect a maximum outstanding amount in excess of the capacity of our credit facility inclusive of any outstanding amounts under our commercial paper program.

WMB long-term credit facility

On February 2, 2015, we entered into the Second Amended and Restated Credit Agreement. The aggregate commitments available remained at $1.5 billion, with up to an additional $500 million increase in aggregate commitments available under certain circumstances. The maturity date of the credit facility was extended to February 2, 2020. However, we may request up to two extensions of the maturity date each for an additional one year period to allow a maturity date as late as February 2, 2022, under certain circumstances. The agreement also allows for swing line loans up to an aggregate amount of $50 million, subject to available capacity under the credit facility, and the letters of credit up to $675 million.

The agreements governing the credit facilities contain the following terms and conditions:


•	Various covenants may limit, among other things, a borrower’s and its material subsidiaries’ ability to grant certain liens supporting indebtedness, merge or consolidate, sell all or substantially all of its assets, enter into certain affiliate transactions, make certain distributions during an event of default, make investments, and allow any material change in the nature of its business.


•	If an event of default with respect to a borrower occurs under its respective credit facility, the lenders will be able to terminate the commitments for the respective borrowers and accelerate the maturity of any loans of the defaulting borrower under the respective credit facility agreement and exercise other rights and remedies.

•

Each time funds are borrowed under our credit facility, the borrower may choose from two methods of calculating interest: a fluctuating base rate equal to the bank’s alternate base rate plus an applicable margin or a periodic fixed rate equal to LIBOR plus an applicable margin. The borrower is required to pay a commitment fee based on the unused portion of its respective credit facility. The applicable margin and the commitment fee are determined for us by reference to a pricing schedule based on our senior unsecured long-term debt ratings.

Significant financial covenants under the agreement require the ratio of debt to EBITDA (each as defined in the credit agreement) be no greater than 5 to 1, except for the fiscal quarter and the two following fiscal quarters in which one or more acquisitions has been executed, in which case the ratio of debt to EBITDA is to be no greater than 5.5 to 1.

We are in compliance with these financial covenants as measured at December 31, 2015.

As of February 25, 2016, $475 million is outstanding under our long-term credit facility.

WPZ long-term credit facilities

Prior to their merger both WPZ and ACMP had separate credit facilities that terminated on February 2, 2015.

On February 2, 2015, WPZ along with Transco, Northwest Pipeline, the lenders named therein, and an administrative agent entered into the Second Amended & Restated Credit Agreement with aggregate commitments available of $3.5 billion, with up to an additional $500 million increase in aggregate commitments available under certain circumstances. The maturity date of the credit facility is February 2, 2020. However, the co-borrowers may request up to two extensions of the maturity date each for an additional one year period to allow a maturity date as late as February 2, 2022, under certain circumstances. The agreement allows for swing line loans up to an aggregate amount of $150 million, subject to available capacity under the credit facility, and letters of credit commitments of $1.125 billion. Transco and Northwest Pipeline are each able to borrow up to $500 million under this credit facility to the extent not otherwise utilized by the other co-borrowers. On December 18, 2015, WPZ along with Transco, Northwest Pipeline, the lenders named therein and an administrative agent entered into the Amendment No. 1 to Second Amended & Restated Credit Agreement modifying the thresholds specified in the covenant related to the maximum ratio of WPZ’s debt to EBITDA.

The agreement governing this credit facility contains the following terms and conditions:

•

Various covenants may limit, among other things, a borrower’s and its material subsidiaries’ ability to grant certain liens supporting indebtedness, merge or consolidate, sell all or substantially all of its assets, enter into certain affiliate transactions, make certain distributions during an event of default, enter into certain restrictive agreements, and allow any material change in the nature of its business.


•	If an event of default with respect to a borrower occurs under the credit facility, the lenders will be able to terminate the commitments for all borrowers and accelerate the maturity of any loans of the defaulting borrower under the credit facility agreement and exercise other rights and remedies.

•

Other than swing line loans, each time funds are borrowed, the borrower must choose whether such borrowing will be an alternate base rate borrowing or a Eurodollar borrowing. If such borrowing is an alternate base rate borrowing, interest is calculated on the basis of the greater of (a) the Prime Rate, (b) the Federal Funds Effective Rate plus one half of 1 percent and (c) a periodic fixed rate equal to the London Interbank Offered Rate (LIBOR) plus 1 percent, plus, in the case of each of (a), (b) and (c), an applicable margin. If the borrowing is a Eurodollar borrowing, interest is calculated on the basis of LIBOR for the relevant period plus an applicable margin. Interest on swingline loans is calculated as the sum of the alternate base rate plus an applicable margin. The borrower is required to pay a commitment fee based on the unused portion of the credit facility. The applicable margin and the commitment fee are determined for each borrower by reference to a pricing schedule based on such borrower’s senior unsecured long-term debt ratings.

Significant financial covenants under the agreement require the ratio of debt to EBITDA, each as defined in the credit facility, be no greater than:


•	5.75 to 1, for the quarters ending December 31, 2015, March 31, 2016 and June 30, 2016;


•	5.50 to 1, for the quarters ending September 30, 2016 and December 31, 2016;


•	5.00 to 1, for the quarter ending March 31, 2017 and each subsequent fiscal quarter, except for the the fiscal quarter and the two following fiscal quarters in which one or more acquisitions has been executed, in which case the ratio of debt to EBITDA is to be no greater than 5.5 to 1.00.

The ratio of debt to capitalization (defined as net worth plus debt) must be no greater than 65 percent for each Transco and Northwest Pipeline. WPZ is in compliance with these financial covenants as measured at December 31, 2015.

As of February 25, 2016, $925 million is outstanding under the long-term credit facility.

WPZ short-term credit facilities

On February 3, 2015, WPZ entered into a short-term $1.5 billion credit facility and terminated it on March 3, 2015.

On August 26, 2015, WPZ entered into a credit agreement providing for a $1.0 billion short-term credit facility with a maturity date of August 24, 2016. On December 23, 2015, WPZ’s short-term credit facility capacity decreased to $150 million in conjunction with entering into the $850 million term loan.

The agreement governing this credit facility contains the following terms and conditions:


•	This facility becomes available when the aggregate amount of outstanding loans under our long-term credit facility plus outstanding commercial paper borrowings reach a total of $3.5 billion.

•

Various covenants that limit, among other things, a borrower’s and its respective material subsidiaries’ ability to grant certain liens supporting indebtedness, merge or consolidate, sell all or substantially all of its assets in certain circumstances, enter into certain affiliate transactions, make certain distributions during an event of default, enter into certain restrictive agreements and allow any material change in the nature of its business.


•	If an event of default with respect to a borrower occurs under the credit facility, the lenders will be able to terminate the commitments and accelerate the maturity of the loans and exercise other rights and remedies.

•

Each time funds are borrowed under the credit facility, the borrower may choose from two methods of calculating interest: a fluctuating base rate equal to an alternate base rate plus an applicable margin, or a periodic fixed rate equal to LIBOR plus an applicable margin. The borrower is required to pay a commitment fee based on the unused portion of the credit facility. The applicable margin and the commitment fee are determined by reference to a pricing schedule based on the borrower’s senior unsecured long-term debt ratings.

The significant financial covenant requires the ratio of debt to EBITDA, each as defined in the credit agreement, as of the last day of any fiscal quarter for which financial statements have been delivered to be no greater than 6.0 to 1.0. WPZ is in compliance with these financial covenants as measured at December 31, 2015.

Commercial Paper Program

On February 2, 2015, WPZ amended and restated the commercial paper program for the ACMP Merger and to allow a maximum outstanding amount of unsecured commercial paper notes of $3 billion. The maturities of the commercial paper notes vary but may not exceed 397 days from the date of issuance. The commercial paper notes are sold under customary terms in the commercial paper market and are issued at a discount from par, or, alternatively, are sold at par and bear varying interest rates on a fixed or floating basis. Proceeds from these notes are used for general partnership purposes, including funding capital expenditures, working capital, and partnership distributions. We classify WPZ’s commercial paper outstanding in Current liabilities in the Consolidated Balance Sheet, as the outstanding notes at December 31, 2015 and December 31, 2014, have maturity dates less than three months from the date of issuance. At December 31, 2015, WPZ had $499 million in Commercial paper outstanding at a weighted average interest rate of 0.92 percent and at December 31, 2014, WPZ had $798 million in Commercial paper outstanding at a weighted average interest rate of 0.92 percent.

Cash Payments for Interest (Net of Amounts Capitalized)

Cash payments for interest (net of amounts capitalized) were $1.023 billion in 2015, $681 million in 2014, and $472 million in 2013.

Restricted Net Assets of Subsidiaries

We have considered the guidance in the Securities and Exchange Commission’s Regulation S-X related to restricted net assets of subsidiaries. In accordance with Rule 4-08(e) of Regulation S-X, we have determined that certain net assets of our subsidiaries are considered restricted under this guidance and exceed 25 percent of our consolidated net assets. As of December 31, 2015, substantially all of these restricted net assets relate to the net assets of WPZ, which are technically considered restricted under this accounting rule due to terms within WPZ’s partnership agreement that govern the partnerships’ assets. Our interest in WPZ’s net assets that are considered to be restricted at December 31, 2015 was $14 billion.

Leases-Lessee

The future minimum annual rentals under noncancelable operating leases, are payable as follows:



	December 31, 2015
	(Millions)
2016	$	86
2017	74
2018	56
2019	45
2020	39
Thereafter	119
Total	$	419

Total rent expense was $164 million in 2015, $109 million in 2014, and $58 million in 2013 and primarily included in Operating and maintenance expenses and Selling, general, and administrative expenses in the Consolidated Statement of Operations.

Accounting Standards Issued and Adopted

In April 2015, the FASB issued ASU 2015-03 “Interest - Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs” (ASU 2015-03). ASU 2015-03 simplifies the presentation of debt issuance costs by requiring such costs be presented as a deduction from the corresponding debt liability. Subsequently, in August 2015, the FASB issued ASU 2015-15 “Interest-Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements-Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting” (ASU 2015-15). In ASU 2015-15 the FASB stated that the guidance in ASU 2015-03 did not address the presentation or subsequent measurement of debt issuance costs related to line-of-credit arrangements, and entities are permitted to defer and present debt issuance costs related to line-of-credit arrangements as assets. The standards are effective for financial statements issued for interim and annual reporting periods beginning after December 15, 2015, and require retrospective presentation. Early adoption is permitted. We elected to early adopt these standards for the periods presented. Accordingly, $123 million and $108 million of debt issuance costs as of December 31, 2015 and 2014, respectively, are now reflected as a direct reduction from Long-term debt in our Consolidated Balance Sheet. Debt issuance costs related to our credit facilities are presented in Regulatory assets, deferred charges, and other in the Consolidated Balance Sheet.