Debt and Interest Rate Derivatives

6 Months Ended

Jun. 30, 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 June 30, 2020:

	June 30,		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 June 30, 2020 and December 31, 2019)	$	9,365	$	9,965
Canadian senior notes, C$500 million maturing September 2026, interest rate of 2.6%		368		385
Tax-exempt bonds, maturing through 2048, fixed and variable interest rates ranging from 0.1% to 4.3% (weighted average interest rate of 2.1% as of June 30, 2020 and 2.3% as of December 31, 2019)		2,471		2,523
Financing leases and other, maturing through 2071, weighted average interest rate of 4.75%		664		710
Debt issuance costs, discounts and other		(80)		(85)
		12,788		13,498
Current portion of long-term debt		3,190		218
	$	9,598	$	13,280

Debt Classification

May 2019 Senior Notes — As of June 30, 2020, we had $3.0 billion of senior notes due 2024, 2026, 2029 and 2039 with a special mandatory redemption feature (the “SMR Notes”). The SMR Notes were issued in May 2019 with the intention of paying a portion of the consideration related to our pending acquisition of Advanced Disposal Services, Inc. (“Advanced Disposal”), which is discussed further in Note 8. Pursuant to the terms of the SMR Notes, we were required to redeem all of such outstanding notes equal to 101% of the aggregate principal amounts of such notes, plus accrued but unpaid interest, as a result of the acquisition not being completed by July 14, 2020. Accordingly, on July 15, 2020, the Company provided notice of the special mandatory redemption, and the redemption was completed on July 20, 2020. As of June 30, 2020, we classified the SMR Notes, net of $22 million of related unamortized discounts and deferred issuance costs, as current obligations.

Other Debt — As of June 30, 2020, in addition to the SMR Notes, net of $22 million of related unamortized discounts and deferred issuance costs, discussed above, we had $1.3 billion of debt maturing within the next 12 months, including (i) $400 million of 4.60% senior notes that mature in March 2021; (ii) $734 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) $212 million of other debt with scheduled maturities within the next 12 months, including $106 million of tax-exempt bonds. As of June 30, 2020, 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 $3.5 billion long-term U.S. and Canadian revolving credit facility (“$3.5 billion revolving credit facility”), as discussed below. The remaining $212 million is classified as current obligations.

As of June 30, 2020, we also had $108 million of variable-rate tax-exempt bonds with long-term scheduled maturities supported by letters of credit under our $3.5 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 $3.5 billion revolving credit facility to fund these bonds until they are remarketed successfully. Accordingly, we have classified the $108 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 June 30, 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 June 30, 2020, we had no outstanding borrowings under this facility. We had $362 million of letters of credit issued which were supported by this facility, leaving unused and available credit capacity of $3.1 billion as of June 30, 2020. 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 June 30, 2020, we had no outstanding borrowings under our commercial paper program.

Other Letter of Credit Facilities — As of June 30, 2020, we utilized $528 million of other letter of credit facilities, which are both committed and uncommitted, with terms maturing through June 2021.

Debt Borrowings and Repayments

Senior Notes — During the six months ended June 30, 2020, we repaid $600 million of 4.75% senior notes that matured in June 2020 with available cash.

Canadian Senior Notes — The $17 million decrease during the six months ended June 30, 2020 is due to decreases in the Canadian currency translation rate.

Tax-Exempt Bonds — During the six months ended June 30, 2020, we repaid $52 million of our tax-exempt bonds with available cash.

Financing Leases and Other — The decrease during the six months ended June 30, 2020 is due to $53 million of cash repayments primarily related to our federal low-income housing investments, financing leases and other obligations, partially offset by an increase of $7 million associated with non-cash financing arrangements.

Interest Rate Derivatives

During the first half of 2020, we entered into treasury rate locks with a total notional value of $400 million to secure an underlying interest rate in anticipation of a debt issuance previously anticipated in the second quarter of 2020. We designated our treasury locks as cash flow hedges. In June 2020, we terminated these treasury rate locks and upon termination received $1 million in cash. We are now evaluating a potential debt issuance to occur during the second half of the year, subject to market conditions and other considerations. As we currently believe that a debt issuance in 2020 is still probable to occur, the gain associated with these treasury rate locks has been deferred as a component of “Accumulated other comprehensive income” and will be amortized to interest expense over the debt term once the issuance occurs.

All financial statement impacts associated with these financial hedges were immaterial as of and for the three and six months ended June 30, 2020. There was no significant ineffectiveness associated with our cash flow hedges during the

three or six months ended June 30, 2020. Refer to Note 10 for information regarding the impacts of our cash flow derivatives on our comprehensive income and results of operations.