Debt and Interest Rate Derivatives

3 Months Ended

Mar. 31, 2020

Debt and Interest Rate Derivatives

Debt and Interest Rate Derivatives

3.    Debt and Interest Rate Derivatives

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 March 31, 2020:

	March 31,		December 31,
	2020		2019
Senior notes, maturing through 2049, interest rates ranging from 2.4% to 7.75% (weighted average interest rate of 3.9% as of March 31, 2020 and December 31, 2019)	$	9,965	$	9,965
Canadian senior notes, C$500 million maturing September 2026, interest rate of 2.6%		355		385
Tax-exempt bonds, maturing through 2048, fixed and variable interest rates ranging from 1.1% to 5.5% (weighted average interest rate of 2.7% as of March 31, 2020 and 2.3% as of December 31, 2019)		2,523		2,523
Financing leases and other, maturing through 2071, weighted average interest rate of 4.7%		690		710
Debt issuance costs, discounts and other		(81)		(85)
		13,452		13,498
Current portion of long-term debt		387		218
	$	13,065	$	13,280

Debt Classification

As of March 31, 2020, we had approximately $1.9 billion of debt maturing within the next 12 months, including (i) $600 million of 4.75% senior notes that mature in June 2020 and $400 million of 4.60% senior notes that mature in March 2021; (ii) $639 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) $237 million of other debt with scheduled maturities within the next 12 months, including $130 million of tax-exempt bonds. As of March 31, 2020, we have classified $1.5 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 $3.5 billion long-term U.S. and Canadian revolving credit facility (“$3.5 billion revolving credit facility”), as discussed below. The remaining $387 million of debt maturing in the next 12 months is classified as current obligations.

As of March 31, 2020, we also have $169 million of variable-rate tax-exempt bonds that are supported by letters of credit under our $3.5 billion revolving credit facility, of which $33 million mature within the next 12 months. 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 $3.5 billion revolving credit facility to fund these bonds until they are remarketed successfully. Accordingly, we have classified the $136 million of variable-rate tax-exempt bonds with maturities of more than one year as long-term in our Condensed Consolidated Balance Sheet as of March 31, 2020.

Access to and Utilization of Credit Facilities and Commercial Paper Program

$3.5 Billion Revolving Credit Facility — Our $3.5 billion revolving credit facility provides us with credit capacity to be used for cash borrowings, to support letters of credit and to support our commercial paper program. 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 March 31, 2020, we had no borrowings and $412 million of letters of credit issued and supported by the facility, leaving unused and available credit capacity of $3.1 billion. WM Holdings, a wholly-owned subsidiary of WM, guarantees all of the obligations under the $3.5 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 $3.5 billion revolving credit facility. As of March 31, 2020, we had no outstanding borrowings under our commercial paper program.

Other Letter of Credit Facilities — As of March 31, 2020, we had utilized $525 million of other letter of credit facilities, which are both committed and uncommitted, with terms maturing through April 2021.

Debt Borrowings and Repayments

Senior Notes — In May 2019, WM issued $4.0 billion of senior notes. A portion of the proceeds was used to retire certain high-coupon senior notes as well as for general corporate purposes including the repayment of outstanding commercial paper at the time of the offering. We intend to use the remaining net proceeds of our May 2019 senior notes issuance 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 8. Certain of these senior notes due 2024, 2026, 2029 and 2039 with an aggregate principal amount of $3.0 billion, include a special mandatory redemption feature. This feature 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 such outstanding notes equal to 101% of the aggregate principal amounts of such notes, plus accrued but unpaid interest.

Canadian Senior Notes — The $30 million decrease during the three months ended March 31, 2020 is due to decreases in the Canadian currency translation rate.

Financing Leases and Other — The decrease during the three months ended March 31, 2020 is due to $25 million of cash repayments primarily related to our federal low-income housing investments, financing leases and other obligations, partially offset by an increase of $5 million associated with non-cash financing arrangements.

Interest Rate Derivatives

In the first quarter of 2020, we entered into a treasury rate lock with a total notional value of $100 million to secure an underlying interest rate in anticipation of a senior note issuance during the second quarter of 2020. We expect to use the net proceeds from this future issuance to repay our 4.75% senior notes due June 2020 and for general corporate purposes. We have designated our treasury lock as a cash flow hedge. All financial statement impacts associated with this financial hedge are immaterial as of and for the quarter ended March 31, 2020. There was no significant ineffectiveness associated with this hedge during the three months ended March 31, 2020.