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DEBT
 9 Months Ended
Sep. 30, 2022
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 September 30, 2022At December 31, 2021
Senior Secured Notes
2025 Notes$250 $250 
Unamortized debt discount and issuance costs(2)(2)
248 248 
Senior Unsecured Notes
2028 Notes350 350 
Unamortized debt discount and issuance costs(3)(4)
347 346 
2029 Notes500 500 
Unamortized debt discount and issuance costs(6)(7)
494 493 
Corporate Credit Facility
Term Loan784 784 
Unamortized debt discount and issuance costs(6)(8)
778 776 
Revolving Corporate Credit Facility(1)
230 — 
Unamortized debt issuance costs(2)
(5)— 
225 — 
Convertible Notes
2022 Convertible Notes— 230 
Unamortized debt discount and issuance costs— (6)
— 224 
2026 Convertible Notes575 575 
Unamortized debt discount and issuance costs(11)(114)
564 461 
Non-interest bearing note payable10 — 
Finance Leases83 83 
$2,749 $2,631 
_________________________
(1)Effective interest rate as of September 30, 2022 was 7.0%.
(2)Excludes $2 million of unamortized debt issuance costs as of December 31, 2021, as no cash borrowings were outstanding under the Revolving Corporate Credit Facility at that time.
The following table shows scheduled principal payments for our debt, excluding finance leases, as of September 30, 2022.
($ in millions)2025
Notes		2028
Notes		2029
Notes		Term
Loan		Revolving Corporate Credit Facility2026 Convertible NotesNon-Interest Bearing Note PayableTotal
Year Payments
2022, remaining$— $— $— $— $— $— $— $— 
2023— — — — — — 6 6 
2024— — — — — — 4 4 
2025250 — — 784 — — — 1,034 
2026— — — — — 575 — 575 
Thereafter— 350 500 — 230 — — 1,080 
$250 $350 $500 $784 $230 $575 $10 $2,699 
Senior Notes
Our senior notes include:
•$500 million aggregate principal amount of 6.125% Senior Secured Notes due 2025 issued in the second quarter of 2020 with a maturity date of September 15, 2025 (the “2025 Notes”), of which $250 million of principal was outstanding as of September 30, 2022.
•$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”).
•$500 million aggregate principal amount of 4.500% Senior Unsecured Notes due 2029 issued in the second quarter of 2021 with a maturity date of June 15, 2029 (the “2029 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 bears interest at LIBOR plus 1.75%, and a revolving credit facility (the “Revolving Corporate Credit Facility”) which includes a letter of credit sub-facility of $75 million.
During the first quarter of 2022, we entered into an amendment to the Revolving Corporate Credit Facility (the “Revolver Amendment”), which increased the borrowing capacity of the existing revolving credit facility from $600 million to $750 million and extended the maturity date from August 31, 2023 to March 31, 2027. The Revolver Amendment modified the interest rate applicable to borrowings under the Revolving Corporate Credit Facility to reference SOFR and to be based on “Adjusted Term SOFR,” which is calculated as Term SOFR (as defined in the Revolver Amendment), plus a 0.10% adjustment, subject to a 0.00% floor. Interest rates for other select non-U.S. dollar borrowings were also amended to be based on updated variable rate indices. The applicable margins with respect to the Revolving Corporate Credit Facility were amended to be based on leverage-based measures instead of credit ratings-based measures. The Revolver Amendment made no other material changes to the Corporate Credit Facility.
During the third quarter of 2022, we borrowed $380 million under our Revolving Corporate Credit Facility, $230 million of which was used to repay the 2022 Convertible Notes (as defined and discussed further below). As of September 30, 2022, $230 million of principal was outstanding and all other amounts borrowed under the Revolving Corporate Credit Facility had been repaid.
Prior to 2020, we entered into $250 million of interest rate swaps under which we pay a fixed rate of 2.9625% 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% 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 $100 million interest rate collar with a cap strike rate of 2.5000% and a floor strike rate of 1.8810% through April 2024 to further hedge our interest rate risk on the Term Loan. Both the interest rate swaps and the interest rate collar have been designated and qualify as cash flow hedges of interest rate risk and are recorded in Other assets on our Balance Sheet as of September 30, 2022 and in Other liabilities on our Balance Sheet as of December 31, 2021. We characterize payments we make or receive in connection with these
derivative instruments as interest expense and a reclassification of accumulated other comprehensive income or loss for presentation purposes.
The following table reflects the activity in accumulated other comprehensive income or loss related to our derivative instruments during the first three quarters of 2022 and 2021. There were no reclassifications to the Income Statement for either of the periods presented below.
($ in millions)20222021
Derivative instrument adjustment balance, January 1$(18)$(39)
Other comprehensive gain before reclassifications16 6 
Derivative instrument adjustment balance, March 31(2)(33)
Other comprehensive gain before reclassifications7 3 
Derivative instrument adjustment balance, June 30$5 $(30)
Other comprehensive gain before reclassifications8 3 
Derivative instrument adjustment balance, September 30$13 $(27)
Convertible Notes
2022 Convertible Notes
During 2017, we issued $230 million aggregate principal amount of 1.50% convertible senior notes for which interest was payable semi-annually (the “2022 Convertible Notes”). The 2022 Convertible Notes matured at par on September 15, 2022, at which time they were settled in cash and the remaining discount and deferred financing costs were fully amortized. The following table reflects the activity related to our 2022 Convertible Notes during the first three quarters of 2022.
($ in millions)Principal AmountUnamortized Debt DiscountUnamortized Debt Issuance CostsDebt, netCarrying Amount of Equity Component, net of Issuance Costs
At December 31, 2021$230 $(5)$(1)$224 $33 
Adoption of ASU 2020-06(1)
— 5 — 5 (33)
At January 1, 2022230 — (1)229 — 
Amortization— — 1 1 — 
Fair value of conversion option transferred to other liabilities(2)
— (5)— (5)— 
At June 30, 2022230 (5)— 225 — 
Amortization— 5 — 5 — 
Repayment upon maturity(230)— — (230)— 
At September 30, 2022$— $— $— $— $— 
________________________
(1)As a result of the adoption of ASU 2020-06 during the first quarter of 2022, we no longer accounted for the liability and equity components of the convertible notes separately, and we reclassified the conversion feature related to the 2022 Convertible Notes from equity to liabilities. Prior period amounts have not been adjusted to reflect our adoption of ASU 2020-06 under the modified retrospective method. See Footnote 2 “Significant Accounting Policies and Recent Accounting Standards” for information on our adoption of ASU 2020-06.
(2)We issued notice of our intent to settle the 2022 Convertible Notes in cash, which became irrevocable on June 15, 2022, and as a result, our previous exception to derivative accounting no longer applied and we were required to fair value the conversion feature on the 2022 Convertible Notes at that time. The fair value of the conversion feature of $5 million was recorded as a debt discount and a corresponding increase to Other liabilities on our balance sheet. Subsequent changes to the fair value of the conversion feature were recorded on our income statement.
The following table shows interest expense information related to the 2022 Convertible Notes.
Three Months EndedNine Months Ended
($ in millions)September 30, 2022September 30, 2021September 30, 2022September 30, 2021
Contractual interest expense$1 $1 $3 $3 
Amortization of debt discount5 1 5 5 
Amortization of debt issuance costs— — 1 1 
$6 $2 $9 $9 
2022 Convertible Note Hedges and Warrants
In connection with the offering of the 2022 Convertible Notes, we concurrently entered into the following privately-negotiated separate transactions: convertible note hedge transactions with respect to our common stock (“2022 Convertible Note Hedges”), covering shares of our common stock, and warrant transactions (“2022 Warrants”), whereby we sold to the counterparties to the 2022 Convertible Note Hedges warrants to acquire approximately 1.6 million shares of our common stock.
The 2022 Note Hedges were required to follow the same settlement provisions as the 2022 Convertible Notes. As such, upon issuance of the irrevocable notice of our intent to settle the 2022 Convertible Notes in cash, our previous exception to the derivative accounting for the 2022 Convertible Note Hedges no longer applied and we were required to fair value the 2022 Convertible Note Hedges at that time. The 2022 Convertible Note Hedges expired upon the maturity of the 2022 Convertible Notes, and none were exercised. The 2022 Warrants expire in ratable portions on a series of expiration dates over the 60 scheduled trading day period commencing on December 15, 2022. As of September 30, 2022, the strike price of the 2022 Warrants was subject to adjustment to approximately $176.11, as a result of the dividends we declared since the issuance of the 2022 Warrants that were greater than the quarterly dividend we paid when the 2022 Warrants were issued. As of September 30, 2022, no 2022 Warrants have been exercised.
2026 Convertible Notes
During 2021, we issued $575 million aggregate principal amount of convertible senior notes (the “2026 Convertible Notes”) that bear interest at a rate of 0.00%. The 2026 Convertible Notes mature on January 15, 2026, unless repurchased or converted in accordance with their terms prior to that date.
The conversion rate is subject to adjustment for certain events as described in the indenture governing the notes, and was subject to adjustment as of September 30, 2022 to 5.9657 shares of common stock per $1,000 principal amount of 2026 Convertible Notes (equivalent to a conversion price of $167.62 per share of our common stock), as a result of the dividends we declared since issuance of the 2026 Convertible Notes that were greater than the quarterly dividend we paid when the 2026 Convertible Notes were issued. Upon conversion, we will pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock, at our election. As of September 30, 2022, the effective interest rate was 0.55%.
The following table shows the net carrying value of the 2026 Convertible Notes.
($ in millions)At September 30, 2022At December 31, 2021
Liability component
Principal amount$575 $575 
Unamortized debt discount(1)
— (104)
Unamortized debt issuance costs(11)(10)
Net carrying amount of the liability component$564 $461 
Carrying amount of equity component, net of issuance costs(1)
$— $117 
________________________
(1)As a result of adoption of ASU 2020-06 during the first quarter of 2022, we no longer account for the liability and equity components of the convertible notes separately, and we reclassified the conversion feature related to the 2026 Convertible Notes from equity to liabilities. Prior period amounts have not been adjusted to reflect our adoption of ASU 2020-06 under the modified retrospective method. See Footnote 2 “Significant Accounting Policies and Recent Accounting Standards” for information on our adoption of ASU 2020-06.
The following table shows interest expense information related to the 2026 Convertible Notes.
Three Months EndedNine Months Ended
($ in millions)September 30, 2022September 30, 2021September 30, 2022September 30, 2021
Amortization of debt discount$— $6 $— $16 
Amortization of debt issuance costs1 1 2 2 
$1 $7 $2 $18 
2026 Convertible Note Hedges and Warrants
In connection with the offering of the 2026 Convertible Notes, we concurrently entered into the following privately-negotiated separate transactions: convertible note hedge transactions with respect to our common stock (“2026 Convertible Note Hedges”), covering a total of approximately 3.4 million shares of our common stock, and warrant transactions (“2026 Warrants”), whereby we sold to the counterparties to the 2026 Convertible Note Hedges, warrants to acquire approximately 3.4 million shares of our common stock. As of September 30, 2022, the strike prices of the 2026 Convertible Note Hedges and the 2026 Warrants were subject to adjustment to approximately $167.62 and $209.53, respectively, and no 2026 Convertible Note Hedges or 2026 Warrants have been exercised.
Security and Guarantees
Amounts borrowed under the Corporate Credit Facility and the 2025 Notes, as well as obligations with respect to letters of credit issued pursuant to the Corporate Credit 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 Corporate Credit Facility, the 2026 Convertible Notes, the 2025 Notes, the 2028 Notes, and the 2029 Notes are guaranteed by MVWC and certain of our direct and indirect, existing and future, domestic subsidiaries, excluding bankruptcy remote special purpose subsidiaries.