Financing arrangements

6 Months Ended

Jun. 30, 2020

Our borrowings consisted of the following (in millions):


	June 30, 2020		December 31, 2019
4.50% notes due 2020 (4.50% 2020 Notes)	$	—	$	300
2.125% notes due 2020 (2.125% 2020 Notes)	—		750
Floating Rate Notes due 2020	—		300
2.20% notes due 2020 (2.20% 2020 Notes)	—		700
3.45% notes due 2020 (3.45% 2020 Notes)	—		900
4.10% notes due 2021 (4.10% 2021 Notes)	—		1,000
1.85% notes due 2021 (1.85% 2021 Notes)	—		750
3.875% notes due 2021 (3.875% 2021 Notes)	1,450		1,750
1.25% €1,250 million notes due 2022 (1.25% 2022 euro Notes)	1,404		1,402
2.70% notes due 2022 (2.70% 2022 Notes)	500		500
2.65% notes due 2022 (2.65% 2022 Notes)	1,500		1,500
3.625% notes due 2022 (3.625% 2022 Notes)	750		750
0.41% CHF700 million bonds due 2023 (0.41% 2023 Swiss franc Bonds)	739		725
2.25% notes due 2023 (2.25% 2023 Notes)	750		750
3.625% notes due 2024 (3.625% 2024 Notes)	1,400		1,400
1.90% notes due 2025 (1.90% 2025 Notes)	500		—
3.125% notes due 2025 (3.125% 2025 Notes)	1,000		1,000
2.00% €750 million notes due 2026 (2.00% 2026 euro Notes)	843		841
2.60% notes due 2026 (2.60% 2026 Notes)	1,250		1,250
5.50% £475 million notes due 2026 (5.50% 2026 pound sterling Notes)	589		630
2.20% notes due 2027 (2.20% 2027 Notes)	1,750		—
3.20% notes due 2027 (3.20% 2027 Notes)	1,000		1,000
4.00% £700 million notes due 2029 (4.00% 2029 pound sterling Notes)	868		928
2.45% notes due 2030 (2.45% 2030 Notes)	1,250		—
2.30% notes due 2031 (2.30% 2031 Notes)	1,250		—
6.375% notes due 2037 (6.375% 2037 Notes)	552		552
6.90% notes due 2038 (6.90% 2038 Notes)	291		291
6.40% notes due 2039 (6.40% 2039 Notes)	466		466
3.15% notes due 2040 (3.15% 2040 Notes)	2,000		—
5.75% notes due 2040 (5.75% 2040 Notes)	412		412
4.95% notes due 2041 (4.95% 2041 Notes)	600		600
5.15% notes due 2041 (5.15% 2041 Notes)	974		974
5.65% notes due 2042 (5.65% 2042 Notes)	487		487
5.375% notes due 2043 (5.375% 2043 Notes)	261		261
4.40% notes due 2045 (4.40% 2045 Notes)	2,250		2,250
4.563% notes due 2048 (4.563% 2048 Notes)	1,415		1,415
3.375% notes due 2050 (3.375% 2050 Notes)	2,250		—
4.663% notes due 2051 (4.663% 2051 Notes)	3,541		3,541
Other notes due 2097	100		100
Unamortized bond discounts, premiums and issuance costs, net	(849)		(868)
Fair value adjustments	678		296
Other	3		—
Total carrying value of debt	34,224		29,903
Less current portion	(91)		(2,953)
Total long-term debt	$	34,133	$	26,950

There are no material differences between the effective interest rates and coupon rates of any of our borrowings, except for the 4.563% 2048 Notes and the 4.663% 2051 Notes, which have effective interest rates of 6.3% and 5.6%, respectively.

Debt issuances and repayments

During the six months ended June 30, 2020, we issued debt securities in the following offerings:

• In February 2020, we issued $5.0 billion of debt consisting of $500 million of the 1.90% 2025 Notes, $750 million of the 2.20% 2027 Notes, $1.25 billion of the 2.45% 2030 Notes, $1.25 billion of the 3.15% 2040 Notes and $1.25 billion of the 3.375% 2050 Notes.

• In May 2020, we issued $4.0 billion of debt, including $1.0 billion of the 2.20% 2027 Notes, $750 million of the 3.15% 2040 Notes and $1.0 billion of the 3.375% 2050 Notes, which represents a further issuance of, and which forms a single series with, each of the corresponding series of notes issued in February 2020, and $1.25 billion of 2.30% 2031 Notes.

In the event of a change-in-control triggering event, as defined in the terms of the notes, we may be required to purchase all or a portion of these notes at a price equal to 101% of the principal amount of the notes plus accrued and unpaid interest. In addition, these notes may be redeemed at any time at our option, in whole or in part, at the principal amount of the notes being redeemed plus accrued and unpaid interest and a “make-whole” amount, which are defined by the terms of the notes. The notes may be redeemed without payment of make-whole amounts if redemption occurs during specified periods of time immediately prior to the maturity of the notes. Such time periods range from one month to six months prior to maturity.

A portion of the proceeds from the issuance of the notes in February 2020 were used to redeem the 3.45% 2020 Notes, the 4.10% 2021 Notes, the 1.85% 2021 Notes and the $300 million aggregate principal amount of our 3.875% 2021 Notes. In connection with the redemption of these notes, we paid a total of $50 million in make-whole amounts plus associated accrued and unpaid interest, all of which was recognized in Interest expense, net, in the Condensed Consolidated Statements of Income. In addition to these redemptions, the 4.50% 2020 Notes, 2.125% 2020 Notes, Floating Rate 2020 Notes and 2.20% 2020 Notes matured and were repaid during the six months ended June 30, 2020.

Interest rate swaps

In connection with the redemption of certain of the notes discussed above, associated interest rate swap contracts with an aggregate notional value of $2.2 billion were terminated. In addition, because of historically low interest rates, during the three months ended March 31, 2020, we terminated interest rate swaps with an aggregate notional amount of $5.2 billion that hedged the 3.625% 2024 Notes, the 2.60% 2026 Notes, the 4.663% 2051 Notes and portions of the 3.625% 2022 Notes and 3.125% 2025 Notes, which resulted in the receipt of $576 million of cash and reduced counterparty credit risk. Immediately following the terminations of these contracts, we entered into new interest rate swap agreements at then-current interest rates on the same $5.2 billion principal amount of notes. See Note 12, Derivative instruments.

The effective interest rates on notes for which we have entered into interest rate swap contracts and the related notional amounts of these contracts were as follows (dollar amounts in millions):


	June 30, 2020					December 31, 2019
Notes	Notional amounts		Effective interest rates	Notional amounts		Effective interest rates
3.45% 2020 Notes	$	—	LIBOR + 1.1%	$	900	LIBOR + 1.1%
4.10% 2021 Notes	—		LIBOR + 1.7%	1,000		LIBOR + 1.7%
3.875% 2021 Notes	1,450		LIBOR + 2.0%	1,750		LIBOR + 2.0%
3.625% 2022 Notes	750		LIBOR + 2.7%	750		LIBOR + 1.6%
3.625% 2024 Notes	1,400		LIBOR + 3.2%	1,400		LIBOR + 1.4%
3.125% 2025 Notes	1,000		LIBOR + 1.8%	1,000		LIBOR + 0.9%
2.60% 2026 Notes	1,250		LIBOR + 1.8%	1,250		LIBOR + 0.3%
4.663% 2051 Notes⁽¹⁾	1,500		LIBOR + 2.6%	1,500		LIBOR + 0.0%
Total notional amounts	$	7,350		$	9,550

^____________

⁽¹⁾ Excludes an additional 1.5% of interest for the difference between the coupon rate paid to note holders and the fixed rate received under the interest rate swap contracts.