DEBT AND LINES OF CREDIT

In February 2012, International Paper issued a $1.2 billion term loan with an initial interest rate of LIBOR plus a margin of 138 basis points that varies depending on the credit rating of the Company and a $200 million term loan with an interest rate of LIBOR plus a margin of 175 basis points, both with maturity dates in 2017. The proceeds from these borrowings were used, along with available cash, to fund the acquisition of Temple-Inland. During 2012, International Paper fully repaid the $1.2 billion term loan.

Amounts related to early debt extinguishment during the years ended December 31, 2012, 2011 and 2010 were as follows:



In millions	2012		2011		2010
Debt reductions (a)	$	1,272	$	129	$	393
Pre-tax early debt extinguishment costs (b)	48		32		39


(a)	Reductions related to notes with interest rates ranging from 1.625% to 9.375% with original maturities from 2010 to 2041 for the years ended December 31, 2012, 2011 and 2010.


(b)	Amounts are included in Restructuring and other charges in the accompanying consolidated statements of operations.

A summary of long-term debt follows:



In millions at December 31	2012		2011
8.7% note – due 2038	$	263	$	273
9 3/8% note – due 2019	846		844
7.95% debentures – due 2018	1,462		1,505
7.5% note – due 2021	999		999
7.4% debentures – due 2014	303		303
7.3% notes – due 2039	721		725
6 7/8% notes – due 2023 – 2029	130		130
6.65% note – due 2037	4		4
6.4% to 7.75% debentures due 2025 – 2027	142		141
6 3/8% to 6 5/8% notes – due 2016 – 2018	373		—
6.0% notes – due 2041	585		600
5.85% notes – due 2012	—		38
5.25% to 5.5% notes – due 2014 – 2016	701		701
4.75% notes – due 2022	899		900
Floating rate notes – due 2012 – 2017 (a)	314		356
Environmental and industrial development bonds – due 2012 – 2035 (b)	1,812		1,958
Short-term notes (c)	255		279
Other (d)	331		152
Total (e)	10,140		9,908
Less: current maturities	444		719
Long-term debt	$	9,696	$	9,189


(a)	The weighted average interest rate on these notes was 2.6% in 2012 and 1.9% in 2011.


(b)	The weighted average interest rate on these bonds was 5.6% in 2012 and 5.5% in 2011.


(c)	The weighted average interest rate was 2.2% in 2012 and 5.0% in 2011. Includes $29 million at December 31, 2012 and $173 million at December 31, 2011 related to non-U.S. denominated borrowings with a weighted average interest rate of 5.6% in 2012 and 5.9% in 2011.


(d)	Includes $61 million at December 31, 2012 and $79 million at December 31, 2011, related to the unamortized gain on interest rate swap unwinds (see Note 13).


(e)	The fair market value was approximately $12.3 billion at December 31, 2012 and $11.2 billion at December 31, 2011.

In addition to the long-term debt obligations shown above, International Paper has $5.3 billion of debt obligations payable to non-consolidated variable interest entities having principal payments of $5.3 billion due in 2016, for which International Paper has, and intends to effect, a legal right to offset these obligations with Class B interests held in the entities. Accordingly, in the accompanying consolidated balance sheet, International Paper has offset the $5.3 billion of debt obligations with $5.2 billion of Class B interests in these entities as of December 31, 2012 (see Note 11). Total maturities of long-term debt over the next five years are 2013 – $444 million; 2014 – $708 million; 2015 – $479 million; 2016 – $571 million; and 2017 – $216 million.

At December 31, 2012, International Paper’s contractually committed credit facilities (the Agreements) totaled $2.5 billion. The Agreements generally provide for interest rates at a floating rate index plus a pre-determined margin dependent upon International Paper’s credit rating. The Agreements include a $1.5 billion contractually committed bank facility that expires in August 2016 and has a facility fee of 0.175% payable quarterly. The Agreements also include up to $1.0 billion of commercial paper-based financings based on eligible receivables balances ($1.0 billion available as of December 31, 2012) under a receivables securitization program. On January 9, 2013, the Company amended the receivables securitization program to extend the maturity date from January 2013 to January 2014. The amended agreement has a facility fee of 0.35% payable monthly. At December 31, 2012, there were no borrowings under either the bank facility or receivables securitization program. In November 2012, International Paper terminated the $250 million receivable securitization facility previously acquired from Temple-Inland.

Maintaining an investment grade credit rating is an important element of International Paper’s financing strategy. At December 31, 2012, the Company held long-term credit ratings of BBB (stable outlook) and Baa3 (stable outlook) by S&P and Moody’s, respectively.