DEBT

3 Months Ended

Mar. 31, 2020

Debt Disclosure [Abstract]

DEBT

13. DEBT

The following table provides detail on our debt balances, net of unamortized debt discount and issuance costs.

($ in millions)		At March 31, 2020			At December 31, 2019
Senior Unsecured Notes
	2026 Notes	$	750		$	750
	Unamortized debt issuance costs	(7		)	(8		)
		743			742
	2028 Notes	350			350
	Unamortized debt discount and issuance costs	(5		)	(5		)
		345			345
Corporate Credit Facility
	Term Loan	891			893
	Unamortized debt discount and issuance costs	(12		)	(12		)
		879			881
	Revolving Corporate Credit Facility	596			30
	Unamortized debt issuance costs	(3		)	(3		)
		593			27
Convertible Notes		230			230
Unamortized debt discount and issuance costs		(21		)	(23		)
		209			207
Finance leases		9			14
		$	2,778		$	2,216

The following table shows scheduled future principal payments for our debt, excluding finance leases, as of March 31, 2020.

($ in millions)	2026 Notes		2028 Notes		Term Loan		Revolving Corporate Credit Facility		Convertible Notes		Total
Payments Year
2020, remaining	$	—	$	—	$	7	$	—	$	—	$	7
2021	—		—		9		—		—		9
2022	—		—		9		—		230		239
2023	—		—		9		596		—		605
2024	—		—		9		—		—		9
Thereafter	750		350		848		—		—		1,948
	$	750	$	350	$	891	$	596	$	230	$	2,817

Senior Unsecured Notes

Our Senior Unsecured Notes, as further discussed below, include the following:

• $750 million aggregate principal amount of 6.500% Senior Unsecured Notes due 2026 issued in the third quarter of 2018 with a maturity date of September 15, 2026 (the “2026 Notes”); and

• $350 million aggregate principal amount of 4.750% Senior Unsecured Notes due 2028 issued in the fourth quarter of 2019 with a maturity date of January 15, 2028 (the “2028 Notes”).

Corporate Credit Facility

Our corporate credit facility (“Corporate Credit Facility”), which provides support for our business, including ongoing liquidity and letters of credit, includes a $900 million term loan facility (the “Term Loan”), which matures on August 31, 2025, and a revolving credit facility with a borrowing capacity of $600 million (the “Revolving Corporate Credit Facility”), including a letter of credit sub-facility of $75 million, that terminates on August 31, 2023.

The Term Loan bears interest at LIBOR plus 1.75 percent. Borrowings under the Revolving Corporate Credit Facility generally bear interest at a floating rate plus an applicable margin that varies from 0.50 percent to 2.75 percent depending on the type of loan and our credit rating. In addition, we pay a commitment fee on the unused availability under the Revolving Corporate Credit Facility at a rate that varies from 20 to 40 basis points per annum, also depending on our credit rating. As of March 31, 2020, we were in compliance with the applicable financial and operating covenants under the Corporate Credit Facility.

As a precautionary measure to ensure adequate liquidity for a sustained period, we borrowed the remaining $386 million under our Revolving Corporate Credit Facility in March 2020 to increase our cash position and preserve financial flexibility in light of the impact on global markets resulting from the COVID-19 pandemic.

In May 2020, we entered into a waiver (the “Waiver”) to the agreement that governs the Corporate Credit Facility. The Waiver, among other things, suspends the requirement to comply with the leverage covenant in the Revolving Corporate Credit Facility for up to four quarters, commencing with the fiscal quarter ending June 30, 2020. During the suspension period, we will be required to maintain monthly minimum liquidity of at least $300 million until the later of March 31, 2021 or the end of the suspension period. In addition, for the duration of the period during which the waiver of the leverage covenant remains in effect, we are prohibited from making certain restricted payments, including share repurchases and dividends.

Further, subsequent to the first quarter of 2020, we repaid the entire $596 million balance that was outstanding on the Revolving Corporate Credit Facility as of March 31, 2020.

Prior to 2020, we entered into $250 million of interest rate swaps under which we pay a fixed rate of 2.9625 percent and receive a floating interest rate through September 2023 and $200 million of interest rate swaps under which we pay a fixed rate of 2.2480 percent and receive a floating interest rate through April 2024, in each case to hedge a portion of our interest rate risk on the Term Loan. We also entered into a $100 million interest rate collar with a cap strike rate of 2.5000 percent and a floor strike rate of 1.8810 percent through April 2024 to further hedge our interest rate risk on the Term Loan. Both the interest rate swaps and the interest rate collar have been designated and qualify as cash flow hedges of interest rate risk and recorded in Other liabilities on our Balance Sheet as of March 31, 2020 and December 31, 2019. We characterize payments we make in connection with these derivative instruments as interest expense and a reclassification of accumulated other comprehensive income for presentation purposes.

The following table reflects the activity in accumulated other comprehensive loss related to our derivative instruments:

	Three Months Ended
($ in millions)	March 31, 2020			March 31, 2019
Derivative instrument adjustment balance, beginning of period	$	(21	)	$	(6	)
Other comprehensive loss before reclassifications	(24		)	(3		)
Reclassification to Income Statement	—			—
Net other comprehensive loss	(24		)	(3		)
Derivative instrument adjustment balance, end of period	$	(45	)	$	(9	)

Senior Secured Notes

Subsequent to the first quarter of 2020, in May 2020, we issued $500 million aggregate principal amount of 6.125% Senior Secured Notes due September 15, 2025 (the “2025 Notes”). The 2025 Notes will be pari passu with and secured by the same collateral as our Corporate Credit Facility. We will pay interest on the 2025 Notes on May 15 and November 15 of each year, commencing on November 15, 2020. We received net proceeds of approximately $494 million from the offering of the 2025 Notes, after deducting fees and expenses related to the offering.

Convertible Notes

During 2017, we issued $230 million of aggregate principal amount of convertible senior notes (the “Convertible Notes”) that bear interest at a rate of 1.50 percent, payable in cash semi-annually. The conversion rate is subject to adjustment for certain events as described in the indenture governing the notes and was subject to adjustment during the first quarter of 2020 to 6.8114 shares of common stock per $1,000 principal amount of Convertible Notes (equivalent to a conversion price of approximately $146.81 per share of our common stock) when we declared a quarterly dividend of $0.54 per share, which was greater than the quarterly dividend when the Convertible Notes were issued. Upon conversion, we will pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election. It is our intent to settle conversions of the Convertible Notes through combination settlement, which contemplates repayment in cash of the principal amount and repayment in shares of our common stock of any excess of the conversion value over the principal amount. As of March 31, 2020, the effective interest rate was 4.7% and the remaining discount amortization period was 2.5 years.

The following table shows the net carrying value of the Convertible Notes.

($ in millions)	At March 31, 2020			At December 31, 2019
Liability component
Principal amount	$	230		$	230
Unamortized debt discount	(18		)	(20		)
Unamortized debt issuance costs	(3		)	(3		)
Net carrying amount of the liability component	$	209		$	207
Carrying amount of equity component, net of issuance costs	$	33		$	33

The following table shows interest expense information related to the Convertible Notes.

	Three Months Ended
($ in millions)	March 31, 2020		March 31, 2019
Contractual interest expense	$	1	$	1
Amortization of debt discount	2		2
Amortization of debt issuance costs	—		—
	$	3	$	3

Convertible Note Hedges and Warrants

In connection with the offering of the Convertible Notes, we concurrently entered into the following privately-negotiated separate transactions: convertible note hedge transactions with respect to our common stock (“Convertible Note Hedges”), covering a total of approximately 1.55 million shares of our common stock, and warrant transactions (“Warrants”), whereby we sold to the counterparties to the Convertible Note Hedges warrants to acquire approximately 1.55 million shares of our common stock at an initial strike price of $176.68 per share. The strike price was subject to adjustment during the first quarter of 2020 to $175.04 per share when we declared a quarterly dividend of $0.54 per share. As of March 31, 2020, no Convertible Note Hedges or Warrants have been exercised.

Restrictions

Amounts borrowed under the Corporate Credit Facility, as well as obligations with respect to letters of credit issued pursuant to that facility, are secured by a perfected first priority security interest in substantially all of the assets of the borrowers under, and guarantors of, that facility (which include MVWC and certain of our direct and indirect, existing and future, domestic subsidiaries, excluding certain bankruptcy remote special purpose subsidiaries), in each case including inventory, subject to certain exceptions. In addition, the 2026 Notes and 2028 Notes are guaranteed by MVWC and certain of our direct and indirect, existing and future, domestic subsidiaries, excluding bankruptcy remote special purpose subsidiaries.