Debt

The following table presents the components of notes payable at October 1, 2016 and January 2, 2016:



	October 1, 2016				January 2, 2016
(millions)	Principal amount		Effective interest rate (a)		Principal amount		Effective interest rate
U.S. commercial paper	$	100	0.48	%	$	899	0.45	%
Europe commercial paper	320		(0.15	)%	261		0.01	%
Bank borrowings	34				44
Total	$	454			$	1,204

(a) Negative effective interest rates on certain borrowings in Europe are the result of efforts by the European Central Bank to stimulate the economy in the eurozone.

In the third quarter of 2016 the Company entered into interest rate swaps with notional amounts totaling approximately $1.6 billion, which effectively converted $700 million of its ten-year 4.0% U.S. Dollar Notes due 2020, $358 million of its ten-year 3.125% U.S. Dollar Notes due 2022, $211 million of its ten-year 2.75% notes due 2023 and $300 million of its ten-year 3.25% Notes due 2026 from fixed to floating rate obligations.

In August 2016, the Company terminated interest rate swaps with notional amounts totaling €600 million, which were designated as fair value hedges of its eight-year 1.00% EUR Notes due 2024. The interest rate swaps effectively converted the interest rate on the Notes from fixed to floating and the unrealized gain upon termination of $13 million will be amortized to interest rate expense over the remaining term of the Notes.

In May 2016, the Company issued €600 million (approximately $671 million USD at October 1, 2016, which reflects the discount and translation adjustments) of eight-year 1.00% Euro Notes due 2024, resulting in aggregate net proceeds after debt discount of $679 million. The proceeds from these Notes were used for general corporate purposes, including, together with cash on hand and additional commercial paper borrowings, repayment of the Company's $750 million, five-year 4.45% U.S. Dollar Notes due 2016 at maturity. The Notes contain customary covenants that limit the ability of the Company and its restricted subsidiaries (as defined) to incur certain liens or enter into certain sale and lease-back transactions, as well as a change of control provision. The Notes were designated as a net investment hedge of the Company's investment in its Europe subsidiary when issued.

In the second quarter of 2016 the Company entered into interest rate swaps with notional amounts totaling approximately $958 million and €600 million which effectively converted $600 million of its 4.0% ten-year U.S. Dollar Notes due 2020, $358 million of its ten-year 3.125% U.S. Dollar Notes due 2022 and €600 million of its eight-year 1.00% Euro Notes due 2024 from fixed to floating rate obligations. The U.S. Dollar interest rate swaps were settled during the quarter for an unrealized gain of $12 million which will be amortized to interest expense over the remaining term of the related Notes.

In March 2016, the Company redeemed $475 million of its 7.45% U.S. Dollar Debentures due 2031. In connection with the debt redemption, the Company incurred $153 million of interest expense, consisting primarily of a premium on the tender offer and also including accelerated losses on pre-issuance interest rate hedges, acceleration of fees and debt discount on the redeemed debt and fees related to the tender offer.

In March 2016, the Company issued $750 million of ten-year 3.25% U.S. Dollar Notes and $650 million of thirty-year 4.5% U.S. Dollar Notes, resulting in aggregate net proceeds after debt discount of $1.382 billion. The proceeds from these Notes were used for general corporate purposes, which included repayment of a portion of the Company’s 7.45% U.S. Dollar Debentures due 2031 and a portion of its commercial paper borrowings. The Notes contain customary covenants that limit the ability of the Company and its restricted subsidiaries (as defined) to incur certain liens or enter into certain sale and lease-back transactions, as well as a change of control provision.

The effective interest rates on debt obligations resulting from the Company’s interest rate swaps as of October 1, 2016 were as follows: (a) five-year 1.875% U.S. Dollar Notes due 2016 – 2.01%; (b) five-year 1.75% U.S. Dollar Notes due 2017 – 1.87%; (c) seven-year 3.25% U.S. Dollar Notes due 2018 – 2.58%; (d) ten-year 4.15% U.S. Dollar Notes due 2019 – 3.54%; (e) ten-year 4.00% U.S. Dollar Notes due 2020 – 2.04%; (f) ten-year 3.125% U.S. Dollar Notes due 2022 – 1.30%; (g) ten-year 3.125% U.S. Dollar Notes due 2023 – 1.43%; (h) eight-year 1.00% Euro Notes due 2024 – 1.08% and (i) ten-year 3.25% U.S. Notes due 2026 – 3.12%.