Debt

9 Months Ended

Sep. 30, 2019

Debt

Debt

3.    Debt

The following table summarizes the major components of debt as of each balance sheet date (in millions) and provides the maturities and interest rate ranges of each major category as of September 30, 2019:

	September 30,		December 31,
	2019		2018
$2.75 billion revolving credit facility, maturing June 2023 (weighted average interest rate of 3.1% as of December 31, 2018)	$	—	$	11
Commercial paper program (weighted average interest rate of 2.9% as of December 31, 2018)		—		990
Senior notes, maturing through 2049, interest rates ranging from 2.4% to 7.75% (weighted average interest rate of 3.9% as of September 30, 2019 and 4.3% as of December 31, 2018)		9,965		6,222
Canadian senior notes, maturing September 2026, interest rate of 2.6%		377		—
Tax-exempt bonds, maturing through 2048, fixed and variable interest rates ranging from 1.35% to 4.3% (weighted average interest rate of 2.3% as of September 30, 2019 and 2.35% as of December 31, 2018)		2,409		2,388
Financing leases and other, maturing through 2071, interest rates up to 9%		692		467
Debt issuance costs, discounts and other		(85)		(52)
		13,358		10,026
Current portion of long-term debt		211		432
	$	13,147	$	9,594

Debt Classification

As of September 30, 2019, we had $1.3 billion of debt maturing within the next 12 months, including (i) $600 million of 4.75% senior notes that mature in June 2020; (ii) $529 million of tax-exempt bonds with term interest rate periods that expire within the next 12 months, which is prior to their scheduled maturities, and (iii) $211 million of other debt with scheduled maturities within the next 12 months, including $124 million of tax-exempt bonds. As of September 30, 2019, we have classified $1.1 billion of debt maturing in the next 12 months as long-term because we have the intent and ability to refinance these borrowings on a long-term basis as supported by the forecasted available capacity under our $2.75 billion long-term U.S. and Canadian revolving credit facility (“$2.75 billion revolving credit facility”), as discussed below. The remaining $211 million is classified as current obligations.

As of September 30, 2019, we also have $154 million of variable-rate tax-exempt bonds that are supported by letters of credit under our $2.75 billion revolving credit facility. The interest rates on our variable-rate tax-exempt bonds are generally reset on either a daily or weekly basis through a remarketing process. All recent tax-exempt bond remarketings have successfully placed Company bonds with investors at market-driven rates and we currently expect future remarketings to be successful. However, if the remarketing agent is unable to remarket our bonds, the remarketing agent can put the bonds to us. In the event of a failed remarketing, we have the availability under our $2.75 billion revolving credit facility to fund these bonds until they are remarketed successfully. Accordingly, we have also classified these borrowings as long-term in our Condensed Consolidated Balance Sheet as of September 30, 2019.

Access to and Utilization of Credit Facilities and Commercial Paper Program

$2.75 Billion Revolving Credit Facility — Our $2.75 billion revolving credit facility provides us with credit capacity to be used for either cash borrowings or to support letters of credit or commercial paper. The rates we pay for outstanding U.S. or Canadian loans are generally based on LIBOR or CDOR, respectively, plus a spread depending on the Company’s debt rating assigned by Moody’s Investors Service and Standard and Poor’s. As of September 30, 2019, we had no

outstanding borrowings under this facility. We had $412 million of letters of credit issued which were supported by this facility, leaving unused and available credit capacity of $2.3 billion as of September 30, 2019. WM Holdings, a wholly-owned subsidiary of WM, guarantees all of the obligations under the $2.75 billion revolving credit facility.

Commercial Paper Program — We have a commercial paper program that enables us to borrow funds for up to 397 days at competitive interest rates. The rates we pay for outstanding borrowings are based on the term of the notes. The commercial paper program is fully supported by our $2.75 billion revolving credit facility. As of September 30, 2019, we had no outstanding borrowings under our commercial paper program.

Other Letter of Credit Facilities — As of September 30, 2019, we utilized $544 million of other letter of credit facilities, which are both committed and uncommitted, with terms maturing through December 2020.

Debt Borrowings and Repayments

$2.75 Billion Revolving Credit Facility — During the nine months ended September 30, 2019, we repaid C$15 million, or $11 million, of Canadian borrowings under our $2.75 billion revolving credit facility with available cash.

Senior Notes — In May 2019, WM issued $4.0 billion of senior notes consisting of:

● $750 million of 2.95% senior notes due June 15, 2024;

● $750 million of 3.20% senior notes due June 15, 2026;

● $1.0 billion of 3.45% senior notes due June 15, 2029;

● $500 million of 4.00% senior notes due July 15, 2039; and

● $1.0 billion of 4.15% senior notes due July 15, 2049.

The net proceeds from these debt issuances were $3.97 billion. Concurrently, we used $344 million of the net proceeds from the newly issued senior notes to retire $257 million of certain high-coupon senior notes. The cash paid includes the principal amount of the debt retired, $84 million of related premiums, which are classified as loss on early extinguishment of debt in our Condensed Consolidated Statement of Operations, and $3 million of accrued interest. The principal amount of senior notes redeemed within each series was as follows:

● $304 million of WM Holdings 7.10% senior notes due 2026, of which $56 million were tendered;

● $395 million of WM 7.00% senior notes due 2028, of which $64 million were tendered;

● $139 million of WM 7.375% senior notes due 2029, of which $58 million were tendered;

● $210 million of WM 7.75% senior notes due 2032, of which $57 million were tendered; and

● $274 million of WM 6.125% senior notes due 2039, of which $22 million were tendered.

We used a portion of the proceeds to repay our commercial paper borrowings as discussed further below. We intend to use the remaining net proceeds to pay a portion of the consideration related to our pending acquisition of Advanced Disposal Services, Inc. (“Advanced Disposal”), pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) which is discussed further in Note 9, and for general corporate purposes. The newly-issued senior notes due 2024, 2026, 2029 and 2039 include a special mandatory redemption feature, which provides that if the acquisition of Advanced Disposal is not completed on or prior to July 14, 2020, or if, prior to such date, the Merger Agreement is terminated for any reason, we will be required to redeem all of the outstanding notes equal to 101% of the aggregate principal amounts of such notes, plus accrued but unpaid interest on the principal amount of such notes.

Canadian Senior Notes — In September 2019, Waste Management of Canada Corporation, an indirect wholly-owned subsidiary of WM, issued C$500 million, or $377 million, of 2.6% senior notes due September 23, 2026, all of which are fully and unconditionally guaranteed on a senior unsecured basis by WM and WM Holdings. The net proceeds from the debt issuance were C$496 million, or $373 million, which we intend to use for general corporate purposes.

Commercial Paper Program — During the nine months ended September 30, 2019, we made net cash repayments of $1.0 billion (net of the related discount on issuance). During the first quarter of 2019, we had net cash borrowings of $357 million (net of the related discount on issuance), which were primarily used to support our acquisition of Petro Waste Environmental LP (“Petro Waste”), which is discussed further in Note 9, and for general corporate purposes. In the second quarter of 2019, we repaid the outstanding balance with proceeds from the May 2019 issuance of senior notes discussed above.

Tax-Exempt Bonds — We issued $115 million of new tax-exempt bonds in 2019. The proceeds from the issuance of these bonds were deposited directly into a restricted trust fund and may only be used for the specific purpose for which the money was raised, which is generally to finance expenditures for landfill and solid waste disposal facility construction and development. In the third quarter of 2019, we elected to refund and reissue $99 million of tax-exempt bonds which resulted in the recognition of a $1 million loss on early extinguishment of debt in our Condensed Consolidated Statement of Operations. Additionally, during the nine months ended September 30, 2019, we repaid $94 million of our tax-exempt bonds with available cash.

Financing Leases and Other — The increase in our financing leases and other debt obligations during the nine months ended September 30, 2019 is primarily related to (i) our new federal low-income housing investment discussed in Note 5, which increased our debt obligations by $140 million and (ii) an increase of $122 million mainly attributable to non-cash financing arrangements. These increases were offset by a net decrease of $37 million, primarily due net cash repayments of debt at maturity.