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DEBT
 9 Months Ended
Sep. 30, 2023
Debt Disclosure [Abstract]  
DEBT
12. DEBT
The following table provides detail on our debt balances, net of unamortized debt discount and issuance costs.
($ in millions)At September 30, 2023At December 31, 2022
Corporate Credit Facility
Term Loan$784 $784 
Unamortized debt discount and issuance costs(4)(6)
780 778 
Revolving Corporate Credit Facility(1)
90 — 
Unamortized debt issuance costs(2)
(4)— 
86 — 
Senior Secured Notes
2025 Notes— 250 
Unamortized debt discount and issuance costs— (2)
— 248 
Senior Unsecured Notes
2028 Notes350 350 
Unamortized debt discount and issuance costs(2)(3)
348 347 
2029 Notes500 500 
Unamortized debt discount and issuance costs(5)(6)
495 494 
Convertible Notes
2026 Convertible Notes575 575 
Unamortized debt issuance costs(7)(10)
568 565 
2027 Convertible Notes575 575 
Unamortized debt issuance costs(13)(15)
562 560 
Finance Leases188 86 
Non-interest bearing note payable4 10 
$3,031 $3,088 
(1)Effective interest rate as of September 30, 2023 was 7.2%.
(2)Excludes $5 million of unamortized debt issuance costs as of December 31, 2022. As no cash borrowings were outstanding under the Revolving Corporate Credit Facility at that time, the unamortized debt issuance costs were included in Other assets.
The following table shows scheduled principal payments for our debt, based on contractual terms and maturity dates, excluding finance leases, as of September 30, 2023.
Payments Year
($ in millions)Remaining 20232024202520262027ThereafterTotal
Term Loan$— $— $784 $— $— $— $784 
Revolving Corporate Credit Facility— — — — 90 — 90 
2028 Notes— — — — — 350 350 
2029 Notes— — — — — 500 500 
2026 Convertible Notes— — — 575 — — 575 
2027 Convertible Notes— — — — 575 — 575 
Non-Interest Bearing Note Payable— 4 — — — — 4 
$— $4 $784 $575 $665 $850 $2,878 
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 $750 million (the “Revolving Corporate Credit Facility”), including a letter of credit sub-facility of $75 million, that terminates on March 31, 2027.
During the second quarter of 2023, we entered into an amendment to the Corporate Credit Facility (the “Amendment”), which modified the interest rate applicable to borrowings under the Term Loan. Beginning July 31, 2023, the Term Loan references the Secured Overnight Financing Rate (“SOFR”) and is based on “Adjusted Term SOFR,” which is calculated as Term SOFR (as defined in the Amendment), plus a 0.10% adjustment for a one-month interest period, a 0.15% adjustment for a three-month interest period, or a 0.25% adjustment for a six-month interest period, subject to a 0.00% floor.
Prior to 2022, we entered into interest rate swaps and an interest rate collar under which we may pay a fixed rate and receive a floating interest rate to hedge a portion of our interest rate risk on the Term Loan. During the second quarter of 2023, we amended these interest rate swaps and the collar to reference SOFR rather than LIBOR, effective July 31, 2023. As a result of this transition, the fixed rate on the $250 million of interest rate swaps that matured in September 2023 was amended to 2.88%, the fixed rate on the $200 million of interest rate swaps maturing in April 2024 was amended to 2.17%, and the cap strike price on the $100 million interest rate collar was amended to 2.43%. Both the interest rate swaps and the interest rate collar have been designated and qualify as cash flow hedges of interest rate risk and are recorded in Other assets on our Balance Sheets as of September 30, 2023 and December 31, 2022. We characterize payments we make or receive in connection with these derivative instruments as interest expense and a reclassification of accumulated other comprehensive income or loss for presentation purposes.
The following table reflects the activity in accumulated other comprehensive income or loss related to our derivative instruments during the first three quarters of 2023 and 2022. There were no reclassifications to the Income Statement for any of the periods presented below.
($ in millions)20232022
Derivative instrument adjustment balance, January 1$13 $(18)
Other comprehensive (loss) gain before reclassifications(3)16 
Derivative instrument adjustment balance, March 3110 (2)
Other comprehensive (loss) gain before reclassifications(1)7 
Derivative instrument adjustment balance, June 309 5 
Other comprehensive (loss) gain before reclassifications(3)8 
Derivative instrument adjustment balance, September 30$6 $13 
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 was outstanding as of December 31, 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”).
Redemption of Senior Secured Notes
During the first quarter of 2023, we redeemed, prior to maturity, the remaining $250 million of the 2025 Notes outstanding pursuant to a redemption notice issued in the fourth quarter of 2022 and the terms of the indenture governing the 2025 Notes. In connection with this redemption, we incurred charges of $10 million, inclusive of a redemption premium and the write-off of unamortized debt issuance costs, which was recorded in Gains (losses) and other income (expense), net on our Income Statement for the nine months ended September 30, 2023.
Convertible Notes
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, 2023 to 6.1044 shares of common stock per $1,000 principal amount of 2026 Convertible Notes (equivalent to a conversion price of $163.82 per share of our common stock), as a result of the dividends we declared since issuance of the 2026 Convertible Notes that were greater than the quarterly dividend we paid when the 2026 Convertible Notes were issued. Upon conversion, we will pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock, at our election. As of September 30, 2023, the effective interest rate was 0.55%.
The following table shows interest expense information related to the 2026 Convertible Notes.
Three Months EndedNine Months Ended
($ in millions)September 30, 2023September 30, 2022September 30, 2023September 30, 2022
Amortization of debt issuance costs$— $1 $2 $2 
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 (the “2026 Convertible Note Hedges”), covering a total of 3.5 million shares of our common stock, and warrant transactions (the “2026 Warrants”), whereby we sold to the counterparties to the 2026 Convertible Note Hedges warrants to acquire 3.5 million shares of our common stock. As of September 30, 2023, the strike prices of the 2026 Convertible Note Hedges and the 2026 Warrants were subject to adjustment to approximately $163.82 and $204.77, respectively, and no 2026 Convertible Note Hedges or 2026 Warrants have been exercised.
2027 Convertible Notes
During 2022, we issued $575 million aggregate principal amount of convertible senior notes (the “2027 Convertible Notes”) that bear interest at a rate of 3.25%. The 2027 Convertible Notes mature on December 15, 2027, unless earlier repurchased or converted in accordance with their terms prior to that date.
The 2027 Convertible Notes are convertible at a rate of 5.2729 shares of common stock per $1,000 principal amount of 2027 Convertible Notes (equivalent to a conversion price of $189.65 per share of our common stock) as of September 30, 2023. The conversion rate is subject to adjustment for certain events as described in the indenture governing the notes. Upon conversion, we will pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock, at our election. As of September 30, 2023, the effective interest rate was 3.88%.
The following table shows interest expense information related to the 2027 Convertible Notes.
Three Months EndedNine Months Ended
($ in millions)September 30, 2023September 30, 2022September 30, 2023September 30, 2022
Contractual interest expense$5 $— $14 $— 
Amortization of debt issuance costs— — 2 — 
$5 $— $16 $— 
2027 Convertible Note Hedges and Warrants
In connection with the offering of the 2027 Convertible Notes, we concurrently entered into the following privately-negotiated separate transactions: convertible note hedge transactions with respect to our common stock (the “2027 Convertible Note Hedges”), covering a total of 3.0 million shares of our common stock, and warrant transactions (the “2027 Warrants”), whereby we sold to the counterparties to the 2027 Convertible Note Hedges warrants to acquire 3.0 million shares of our common stock. As of September 30, 2023, the strike prices of the 2027 Convertible Note Hedges and the 2027 Warrants were $189.65 and $286.26, respectively, and no 2027 Convertible Note Hedges or 2027 Warrants have been exercised.
Security and Guarantees
Amounts borrowed under the Corporate Credit Facility, 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 2027 Convertible 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 certain bankruptcy remote special purpose subsidiaries.
Finance Lease
During 2020, we entered into a finance lease arrangement, which was amended in 2021, for our new global headquarters office building in Orlando, Florida. The lease for the new building commenced for accounting purposes during the first quarter of 2023, upon the substantial completion of construction. The lease includes a 26-year lease term, consisting of a 16-year initial term plus two five-year renewal options. As of September 30, 2023, the present value of the future lease payments, net of lease incentives, was $78 million, with a corresponding lease liability of $99 million. We record right-of-use assets for our finance leases in Property and equipment, net. Our total payments under this lease are $245 million, of which we expect $1 million, $7 million, $8 million, $8 million, $9 million, and $212 million will be paid in 2023, 2024, 2025, 2026, 2027, and thereafter, respectively.