Debt and Borrowing Arrangements

6 Months Ended

Jun. 30, 2020

Note 8. Debt and Borrowing Arrangements

Short-Term Borrowings:

Our short-term borrowings and related weighted-average interest rates consisted of:



	As of June 30, 2020				As of December 31, 2019
	Amount Outstanding		Weighted- Average Rate		Amount Outstanding		Weighted- Average Rate
	(in millions, except percentages)
Commercial paper	$	2,682	0.6	%	$	2,581	2.0	%
Bank loans	73		5.8	%	57		5.2	%
Total short-term borrowings	$	2,755			$	2,638

As of June 30, 2020, commercial paper issued and outstanding had between 1 and 154 days remaining to maturity. Commercial paper borrowings since year end increased to finance the payment of long-term debt maturities, share repurchases and dividend payments offset in part by proceeds from issuances of long-term debt and operating cash flows.

Some of our international subsidiaries maintain primarily uncommitted credit lines to meet short-term working capital needs. Collectively, these credit lines amounted to $1.5 billion at June 30, 2020 and $1.7 billion at December 31, 2019. Borrowings on these lines were $73 million at June 30, 2020 and $57 million at December 31, 2019.

On March 24, 2020, we entered into a $1.75 billion revolving credit agreement for a 364-day senior unsecured credit facility that expires on March 23, 2021. On April 1, 2020, we increased the credit facility from $1.75 billion to $1.95 billion. The agreement includes the same terms and conditions as our existing $4.5 billion multi-year credit facility discussed below with the exception that proceeds from a long-term debt issuance would be used to reduce the credit facility. As of June 30, 2020, no amounts were drawn on the facility. On July 2, 2020 we issued $1.0 billion of long-term debt and reduced the size of the credit facility to $0.95 billion.

On March 6, 2020, we entered into a $2.5 billion credit agreement for a 364-day unsecured credit facility that expires on March 5, 2021. The agreement includes the same terms and conditions as our existing $4.5 billion multi-year credit facility discussed below with the exception that proceeds from a long-term debt issuance would be used to reduce the credit facility. On May 6, 2020, we terminated this facility after issuing long-term debt and repaying previous drawdowns.

On February 26, 2020, we entered into a $1.5 billion revolving credit agreement for a 364-day senior unsecured credit facility that expires on February 24, 2021. The agreement replaces our previous credit agreement that was scheduled to expire on February 26, 2020 and includes the same terms and conditions as our existing $4.5 billion multi-year credit facility discussed below. As of June 30, 2020, no amounts were drawn on the facility.

We also maintain a $4.5 billion multi-year senior unsecured revolving credit facility for general corporate purposes, including working capital needs, and to support our commercial paper program. The credit facility is scheduled to expire on February 27, 2024. The revolving credit agreement includes a covenant that we maintain a minimum shareholders' equity of at least $24.6 billion, excluding accumulated other comprehensive earnings/(losses), the cumulative effects of any changes in accounting principles and earnings/(losses) recognized in connection with the ongoing application of any mark-to-market accounting for pensions and other retirement plans. At June 30, 2020, we complied with this covenant as our shareholders' equity, as defined by the covenant, was $37.4 billion. The revolving credit facility also contains customary representations, covenants and events of default. There are no credit rating triggers, provisions or other financial covenants that could require us to post collateral as security. As of June 30, 2020, no amounts were drawn on the facility.

Long-Term Debt:

On July 2, 2020, we issued $1.0 billion of 0.625% U.S. dollar-denominated notes that mature on July 1, 2022. We received proceeds of $998.1 million, net of discounts and associated financing costs. The proceeds were used to repay outstanding commercial paper borrowings and for general corporate purposes. We recorded approximately $1.9 million of discounts and deferred financing costs that will be amortized evenly into interest expense over the life of the notes.

On May 7, 2020, $750 million of our 3.000% U.S. dollar-denominated notes matured. The notes and accrued interest to date were paid with the issuance of commercial paper and cash on hand.

On May 4, 2020, we issued an $750 million of 1.500% U.S. dollar-denominated notes that mature on May 4, 2025. We received proceeds of $743.9 million, net of discounts and associated financing costs. The proceeds were used to repay amounts outstanding under our revolving credit agreement and commercial paper borrowings and used for general corporate purposes. We recorded approximately $6.1 million of discounts and deferred financing costs that will be amortized evenly into interest expense over the life of the notes.

On April 13, 2020, we issued $500 million of 2.750% U.S. dollar-denominated notes that mature on April 13, 2030. On May 4, 2020, we issued an additional $750 million of notes bringing the aggregate principal issued and due on April 13, 2030 to $1.25 billion. We received proceeds of $1,283.9 million, net of premium and associated financing costs. The proceeds were used to repay amounts outstanding under our revolving credit agreement and commercial paper borrowings and for general corporate purposes. We recorded approximately $33.9 million of premium and deferred financing costs that will be amortized evenly into interest expense over the life of the notes.

On April 13, 2020, we issued $500 million of 2.125% U.S. dollar-denominated notes that mature on April 13, 2023. We received proceeds of $497.8 million, net of discounts and associated financing costs. The proceeds were used to repay amounts outstanding under our revolving credit agreement. We recorded approximately $2.2 million of discounts and deferred financing costs that will be amortized evenly into interest expense over the life of the notes.

On March 30, 2020, fr225 million (or $235 million) of our 0.05% Swiss franc notes matured. The notes and accrued interest to date were paid from the amounts drawn on our 364-day revolving credit facility, commercial paper and cash on hand.

On February 10, 2020, $427 million of our 5.375% U.S. dollar notes matured. The bonds and accrued interest to date were paid with the issuance of commercial paper and cash on hand.

Fair Value of Our Debt:

The fair value of our short-term borrowings at June 30, 2020 and December 31, 2019 reflects current market interest rates and approximates the amounts we have recorded on our condensed consolidated balance sheets. The fair value of our long-term debt was determined using quoted prices in active markets (Level 1 valuation data) for the publicly traded debt obligations. At June 30, 2020, the aggregate fair value of our total debt was $21,055 million and its carrying value was $19,704 million. At December 31, 2019, the aggregate fair value of our total debt was $19,388 million and its carrying value was $18,426 million.

Interest and Other Expense, net:

Interest and other expense, net consisted of:



	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2020			2019			2020			2019
	(in millions)
Interest expense, debt	$	108		$	127		$	218		$	250
Loss related to interest rate swaps	—			—			103			—
Other (income)/expense, net	(23		)	(26		)	(46		)	(69		)
Interest and other expense, net	$	85		$	101		$	275		$	181

Other income includes amounts excluded from hedge effectiveness related to our net investment hedge derivative contracts and totaled $31 million and $64 million for the three and six months ended June 30, 2020 and $34 million and $67 million for the three and six months ended June 30, 2019.