Long-Term Debt and Note Payable - Affiliate

12 Months Ended

Dec. 31, 2021

Debt Disclosure [Abstract]

Long-Term Debt and Revolving Promissory Note

Long-Term Debt and Note Payable - Affiliate

The following chart reflects (i) the consolidated long-term debt of Qwest Corporation and its subsidiaries, including finance leases, unamortized premiums, net, and unamortized debt issuance costs and (ii) note payable-affiliate:

			As of December 31,
	Interest Rates (2)	Maturities (2)	2021		2020
			(Dollars in millions)
Senior notes	6.500% - 7.750%	2025 - 2057	$	1,986	3,170
Term loan (1)	LIBOR + 2.00%	2027	215		215
Finance leases	Various	Various	2		6
Unamortized premiums, net			6		5
Unamortized debt issuance costs			(53)		(62)
Total long-term debt			2,156		3,334
Less current maturities			—		(948)
Long-term debt, excluding current maturities			$	2,156	2,386
Note payable-affiliate	4.800%	2022	$	1,187	1,130

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(1) Qwest Corporation's Term Loan had interest rates of 2.110% and 2.150% as of December 31, 2021 and December 31, 2020.

(2) As of December 31, 2021.

Repayments

On December 1, 2021, Qwest Corporation paid at maturity the $950 million principal amount of its 6.750% Senior Notes.

Redemption of Senior Notes

On February 16, 2021, Qwest Corporation fully redeemed all $235 million aggregate principal amount of its outstanding 7.000% Senior Notes due 2056.

On December 14, 2020, Qwest Corporation fully redeemed all $775 million aggregate principal amount of its outstanding 6.125% Senior Notes due 2053 (the "6.125% Notes").

On October 26, 2020, Qwest Corporation redeemed all of the remaining $160 million aggregate principal amount of its outstanding 6.625% Senior Notes due 2055 (the "6.625% Notes").

On September 16, 2020, Qwest Corporation partially redeemed $250 million aggregate principal amount of its outstanding 6.625% Senior Notes.

On August 7, 2020, Qwest Corporation redeemed all of the remaining $300 million aggregate principal amount of its outstanding 6.875% Senior Notes due 2054 (the "6.875% Notes").

On June 29, 2020, Qwest Corporation partially redeemed $200 million aggregate principal amount of its outstanding 6.875% Senior Notes.

On January 15, 2020, Qwest Corporation fully redeemed (i) all $850 million aggregate principal amount of its outstanding 6.875% Senior Notes due 2033, and (ii) all $250 million aggregate principal amount of its outstanding 7.125% Senior Notes due 2043.

For the year ended December 31, 2021 and 2020, redemptions of Senior Notes resulted in a loss of $8 million and $63 million, respectively.

Term Loan

In 2015, we entered into a term loan in the amount of $100 million with CoBank ACB. On October 23, 2020, we borrowed $215 million under a variable-rate term loan with CoBank ACB and used the resulting net proceeds to pay off its previous $100 million term loan with CoBank ACB. Additionally, on October 26, 2020, we used the remaining net proceeds to partially facilitate the above-mentioned redemption of our remaining 6.625% Notes. The outstanding unpaid principal amount of this new term loan plus any accrued and unpaid interest is due on October 23, 2027. Interest is paid at least quarterly based upon either the LIBOR or the base rate (as defined in the credit agreement) plus an applicable margin between 1.50% to 2.50% per annum for LIBOR loans and 0.50% to 1.50% per annum for base rate loans depending on Qwest Corporation's then current senior unsecured long-term debt rating.

Long-Term Debt Maturities

Set forth below is the aggregate principal amount of our long-term debt as of December 31, 2021 (excluding unamortized premiums, net, unamortized debt issuance costs and note payable-affiliate) maturing during the following years:

	(Dollars in millions)
2022	$	—
2023	—
2024	—
2025	250
2026	—
2027 and thereafter	1,953
Total long-term debt	$	2,203

Note Payable - Affiliate

Qwest Corporation is currently indebted to an affiliate of our ultimate parent company, Lumen Technologies, Inc., under a revolving promissory note that provides Qwest Corporation with a funding commitment of up to $965 million in aggregate principal amount (the "Intercompany Note"). The outstanding principal balance owed by Qwest Corporation under the Intercompany Note and the accrued interest thereon is due and payable on demand, but if no demand is made, then on June 30, 2022. Interest is accrued on the outstanding principal balance during the respective interest period using a weighted average per annum interest rate on the consolidated outstanding debt of Lumen Technologies, Inc. and its subsidiaries. As of December 31, 2021 and 2020, the Intercompany Note is reflected on our consolidated balance sheets as a current liability under "Note payable - affiliate". In accordance with the terms of the Intercompany Note, interest shall be assessed on June 30th and December 31st (an "Interest Period"). Any assessed interest for an Interest Period that remains unpaid on the last day of the subsequent Interest Period is to be capitalized on such date and is to begin accruing interest. Through December 31, 2021, $223 million of such interest has been capitalized since entering into the Intercompany Note. As of December 31, 2021 and 2020, $29 million and $28 million of accrued interest is reflected in other current liabilities on our consolidated balance sheet, respectively.

Interest Expense

Interest expense includes interest on total long-term debt. The following table presents the amount of gross interest expense, net of capitalized interest and interest expense-affiliates, net:

	Years Ended December 31,
	2021		2020	2019
	(Dollars in millions)
Interest expense:
Gross interest expense	$	200	308	407
Capitalized interest	(19)		(29)	(27)
Total interest expense	$	181	279	380
Interest expense-affiliates, net	$	105	74	62

Covenants

Our senior notes were issued under indentures dated April 15, 1990 and October 15, 1999. These indentures contain certain covenants including, but not limited to: (i) a prohibition on certain liens on our assets; and (ii) a limitation on mergers or sales of all, or substantially all, of our assets, which limitation requires that a successor assume the obligation with regard to these notes. These indentures do not contain any cross-default provisions. These indentures do not contain any financial covenants or restrictions on our ability to issue new securities thereunder. Except for a limited number of series of our notes, we generally can redeem our senior notes, at our option, typically at a fixed price.

Under our term loan, we must maintain a debt to EBITDA (earnings before interest, taxes, depreciation and amortization) ratio of not more than 2.85:1.0, as determined and calculated in the manner described in the term loan documentation. The term loan also contains a negative pledge covenant, which generally requires us to secure equally and ratably any advances under the term loan if we pledge assets or permit liens on our property for the benefit of other debtholders. The term loan also has a cross payment default and cross acceleration provisions. When present, these provisions could have a wider impact on liquidity than might otherwise arise from a default or acceleration of a single debt instrument. Our debt to EBITDA ratio could be adversely impacted by a wide variety of events, including unforeseen contingencies, many of which are beyond our control. This could reduce our financing flexibility due to potential restrictions on incurring additional debt under certain provisions of our debt agreements or, in certain circumstances, could result in a default under certain provisions of such agreements.

None of our long-term debt is secured or guaranteed by other companies.

Compliance

At December 31, 2021 and 2020, we believe we were in compliance with the financial covenants contained in our material debt agreements in all material respects.