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Debt

9 Months Ended

Sep. 30, 2020


Note 5. Debt

Significant Debt Transactions

The following table shows the transactions that occurred during the nine months ended September 30, 2020.

Redemptions, Repurchases and Repayments


(dollars in millions)	Principal Redeemed/ Repurchased/ Repaid		Amount Paid ⁽¹⁾
Three Months Ended March 31, 2020
Verizon 4.950% notes due 2047	$	1,475	$	1,475





Three Months Ended March 31, 2020 total	$	1,475	$	1,475


Three Months Ended June 30, 2020
Verizon 5.143% preferred stock due 2020	$	1,650	$	1,650
Verizon floating rate (LIBOR +0.550%) notes due 2020⁽²⁾	1,018		1,018
Verizon 4.600% notes due 2021	920		949
Verizon 3.125% notes due 2022	1,256		1,314
Open market repurchases of various Verizon notes	121		143
Verizon 2.375% notes due 2022 ⁽³⁾	€	935	$	1,199
Verizon 0.500% notes due 2022 ⁽⁴⁾	€	454	$	517
Three Months Ended June 30, 2020 total			6,790







Nine Months Ended September 30, 2020 total			$	8,265

⁽¹⁾ Represents amount paid to redeem, repurchase or repay, excluding interest or dividend.

⁽²⁾ The three-month London Interbank Offered Rate (LIBOR).

⁽³⁾ Principal and premium amount repaid was €980 million. U.S. dollar amount paid includes cash settlement from derivatives entered into in connection with the transaction. See Note 7 for information on cross currency swaps.

⁽⁴⁾ Principal and premium amount repaid was €463 million. U.S. dollar amount paid includes cash settlement from derivatives entered into in connection with the transaction. See Note 7 for information on cross currency swaps.

Issuances


(amounts in millions)	Principal Amount Issued		Net Proceeds ⁽¹⁾
Three Months Ended March 31, 2020
Verizon 3.600% notes due 2060	$	2,385	$	2,369
Verizon 3.000% notes due 2027	750		747
Verizon 3.150% notes due 2030	1,500		1,489
Verizon 4.000% notes due 2050	1,250		1,241
Three Months Ended March 31, 2020 total	$	5,885	$	5,846


Three Months Ended June 30, 2020
Verizon 2.500% notes due 2030 ⁽²⁾	C$	1,000	$	705
Verizon 3.625% notes due 2050 ⁽²⁾	C$	300	209
Verizon 1.300% notes due 2033 ⁽²⁾	€	1,350	1,464
Verizon 1.850% notes due 2040 ⁽²⁾	€	800	869


Three Months Ended June 30, 2020 total			$	3,247


Three Months Ended September 30, 2020
Verizon 1.500% notes due 2030 ⁽³⁾	$	1,000	$	995
Verizon 3.000% notes due 2060	1,123		1,115
Three Months Ended September 30, 2020 total	$	2,123	$	2,110
Nine Months Ended September 30, 2020 total			$	11,203

⁽¹⁾ Net proceeds were net of discount and issuance costs.

⁽²⁾ See Note 7 for information on cross currency swaps.

⁽³⁾ An amount equal to the net proceeds from this green bond is expected to be used to fund, in whole or in part, certain renewable energy projects, including new and existing investments made by us during the period from July 1, 2020 through the maturity date of the green bond.

October Exchange Offers

In October 2020, we completed private exchange offers with respect to 17 series of existing Verizon notes in two separate transactions. In connection with the first set of exchange offers, we issued $1.1 billion principal amount of new Verizon 1.680% notes due 2030 in exchange for $1.0 billion principal amount of existing notes, including $31 million principal amount of notes maturing in 2021 that have been reclassified from Debt maturing within one year to Long-term debt in our condensed consolidated balance sheets as of September 30, 2020. In connection with the second set of exchange offers, we issued $4.5 billion principal amount of new Verizon 2.987% notes due 2056, plus an aggregate of $748 million in cash, in exchange for $3.7 billion principal amount of existing notes.

Short-Term Borrowing and Commercial Paper Program

In April 2020, we issued $3.5 billion in commercial paper, of which $2.5 billion was repaid during the three months ended June 30, 2020 and the remaining $1.0 billion was repaid during the three months ended September 30, 2020. These transactions were recorded within Other, net cash flow from financing in our condensed consolidated statements of cash flows. As of September 30, 2020, we had no commercial paper outstanding.

Asset-Backed Debt

As of September 30, 2020, the carrying value of our asset-backed debt was $10.1 billion. Our asset-backed debt includes Asset-Backed Notes (ABS Notes) issued to third-party investors (Investors) and loans (ABS Financing Facilities) received from banks and their conduit facilities (collectively, the Banks). Our consolidated asset-backed debt bankruptcy remote legal entities (each, an ABS Entity or collectively, the ABS Entities) issue the debt or are otherwise party to the transaction documentation in connection with our asset-backed debt transactions. Under the terms of our asset-backed debt, Cellco Partnership (Cellco) and certain other affiliates of Verizon (collectively, the Originators) transfer device payment plan agreement receivables to one of the ABS Entities, which in turn transfers such receivables to another ABS Entity that issues the debt. Verizon entities retain the equity interests in the ABS Entities, which represent the rights to all funds not needed to make required payments on the asset-backed debt and other related payments and expenses.

Our asset-backed debt is secured by the transferred device payment plan agreement receivables and future collections on such receivables. The device payment plan agreement receivables transferred to the ABS Entities and related assets, consisting primarily of restricted cash, will only be available for payment of asset-backed debt and expenses related thereto, payments to the Originators in respect of additional transfers of device payment plan agreement receivables, and other obligations arising from our asset-backed debt transactions, and will not be available to pay other obligations or claims of Verizon’s creditors until the associated asset-backed debt and other obligations are satisfied. The Investors or Banks, as applicable, which hold our asset-backed debt have legal recourse to the assets securing the debt, but do not have any recourse to Verizon with respect to the payment of principal and interest on the debt. Under a parent support agreement, Verizon has agreed to guarantee certain of the payment obligations of Cellco and the Originators to the ABS Entities.

Cash collections on the device payment plan agreement receivables collateralizing asset-backed debt securities are required at certain specified times to be placed into segregated accounts. Deposits to the segregated accounts are considered restricted cash and are included in Prepaid expenses and other and Other assets in our condensed consolidated balance sheets.

Proceeds from our asset-backed debt transactions are reflected in Cash flows from financing activities in our condensed consolidated statements of cash flows. The asset-backed debt issued and the assets securing this debt are included in our condensed consolidated balance sheets.

As mentioned above, the holders of our asset-backed debt do not have any recourse to Verizon with respect to the payment of principal and interest on the debt. However, if an early amortization of our asset-backed debt occurs, including as a result of increased customer delinquencies or losses relating to COVID-19, all collections on the securitized device payment plan agreement receivables would be used to pay principal and interest on the asset-backed debt, and our financing cash flow requirements would increase for the twelve months immediately following an early amortization event.

ABS Notes

During the nine months ended September 30, 2020, we completed the following ABS Notes transactions:


(dollars in millions)	Interest Rates %		Expected Weighted-average Life to Maturity (in years)	Principal Amount Issued
March 2020
A-1a Senior class notes	1.850		2.46	$	1,326
A-1b Senior floating rate class notes	LIBOR + 0.270	⁽¹⁾	2.46	100
B Junior class notes	1.980		3.18	98
C Junior class notes	2.060		3.36	76
March 2020 total				1,600

September 2020
A Senior class notes	0.470		2.48	1,426
B Junior class notes	0.680		3.18	98
C Junior class notes	0.830		3.36	76
September 2020 total				1,600
Total				$	3,200

⁽¹⁾ The one-month LIBOR at September 30, 2020 was 0.148%.

Under the terms of each series of ABS Notes, there is a two-year revolving period during which we may transfer additional receivables to the ABS Entity. During the three and nine months ended September 30, 2020, we made aggregate principal repayments of $864 million and $2.7 billion, respectively, on ABS Notes that have entered the amortization period, including principal payments made in connection with clean-up redemptions.

ABS Financing Facilities

In May 2020, we amended and restated our outstanding ABS financing facility originally entered into in 2016, and previously amended and restated in 2019, with a number of financial institutions (ABS Financing Facility). Under the terms of the ABS Financing Facility, the financial institutions make advances under asset-backed loans backed by device payment plan agreement receivables of both consumer and business customers. One loan agreement is outstanding in connection with the ABS Financing Facility, and such loan agreement was amended and restated in May 2020. The loan agreement has a final maturity date in May 2024 and bears interest at floating rates. There is a one year revolving period until May 2021, which may be extended with the approval of the financial institutions. Under the loan agreement, we have the right to prepay all or a portion of the advances at any time without penalty, but in certain cases, with breakage costs. Subject to certain conditions, we may also remove receivables from the ABS Entity. In January 2020, we prepaid $1.3 billion of the loan under the loan agreement. In March 2020, we borrowed an additional $1.3 billion under the loan agreement. In June 2020, we prepaid $1.5 billion of the loan under the loan agreement. In September 2020, we prepaid $1.3 billion of the loan under the loan agreement. The aggregate outstanding balance under the ABS Financing Facility was $500 million as of September 30, 2020.

Variable Interest Entities (VIEs)

The ABS Entities meet the definition of a VIE for which we have determined that we are the primary beneficiary as we have both the power to direct the activities of the entity that most significantly impact the entity’s performance and the obligation to absorb losses or the right to receive benefits of the entity. Therefore, the assets, liabilities and activities of the ABS Entities are consolidated in our financial results and are included in amounts presented on the face of our condensed consolidated balance sheets.

The assets and liabilities related to our asset-backed debt arrangements included in our condensed consolidated balance sheets were as follows:


	At September 30,		At December 31,
(dollars in millions)	2020		2019
Assets
Account receivable, net	$	9,438	$	10,525
Prepaid expenses and other	1,013		1,180
Other assets	3,011		3,856

Liabilities
Accounts payable and accrued liabilities	8		11
Short-term portion of long-term debt	3,589		5,578
Long-term debt	6,503		6,791

See Note 6 for additional information on device payment plan agreement receivables used to secure asset-backed debt.

Long-Term Credit Facilities


				At September 30, 2020
(dollars in millions)	Maturities	Facility Capacity		Unused Capacity		Principal Amount Outstanding
Verizon revolving credit facility ⁽¹⁾	2022	$	9,500	$	9,391	n/a
Various export credit facilities ⁽²⁾	2022-2028	7,500		1,000		$	5,059
Total		$	17,000	$	10,391	$	5,059

n/a - not applicable

⁽¹⁾ The revolving credit facility does not require us to comply with financial covenants or maintain specified credit ratings, and it permits us to borrow even if our business has incurred a material adverse change. The revolving credit facility provides for the issuance of letters of credit.

⁽²⁾ These credit facilities are used to finance equipment-related purchases. Borrowings under certain of these facilities amortize semi-annually in equal installments up to the applicable maturity dates. Maturities reflect maturity dates of principal amounts outstanding.

In October 2020, we amended our $9.5 billion revolving credit facility to extend its maturity to 2024.

Non-Cash Transactions

During the nine months ended September 30, 2020 and 2019, we financed, primarily through vendor financing arrangements, the purchase of approximately $1.3 billion and $356 million, respectively, of long-lived assets consisting primarily of network equipment. At September 30, 2020 and December 31, 2019, $1.6 billion and $1.1 billion, respectively, relating to these financing arrangements, including those entered into in prior years and liabilities assumed through acquisitions, remained outstanding. These purchases are non-cash financing activities and therefore are not reflected within Capital expenditures in our condensed consolidated statements of cash flows.

Guarantees

We guarantee the debentures of our operating telephone company subsidiaries. As of September 30, 2020, $765 million aggregate principal amount of these obligations remained outstanding. Each guarantee will remain in place for the life of the obligation unless terminated pursuant to its terms, including the operating telephone company no longer being a wholly-owned subsidiary of Verizon.

We also guarantee the debt obligations of GTE LLC as successor in interest to GTE Corporation that were issued and outstanding prior to July 1, 2003. As of September 30, 2020, $391 million aggregate principal amount of these obligations remained outstanding.

Covenants

We and our consolidated subsidiaries are in compliance with all of our restrictive covenants.