LONG-TERM DEBT
Lines of Credit
The company has available uncommitted short term credit lines in the form of money market facilities with several banks. The amount and conditions for borrowing under these credit lines depend on the availability and terms prevailing in the marketplace. No fees or compensating balances are required for these credit facilities.
Credit Facility
In August 2013, the company entered into a new five-year senior unsecured credit facility in an aggregate principal amount of $1.775 billion (the Credit Agreement). The Credit Agreement replaced the company’s prior five-year revolving credit facility in an aggregate principal amount of $1.5 billion entered into on September 8, 2011, and its 364-day revolving credit facility in an aggregate principal amount of $500 million entered into on September 4, 2012.
The Credit Agreement contains customary terms and conditions, including covenants restricting the company's ability to sell all or substantially all of its assets, merge or consolidate with another entity or undertake other fundamental changes and incur liens. The company also cannot permit the ratio of its debt to capitalization (as set forth in the Credit Agreement) to exceed 65 percent. The company is in compliance with all covenants under the Credit Agreement. At December 31, 2013, there was no balance outstanding under this facility.
Issuance and Redemption
In May 2013, the company issued $2.85 billion of unsecured senior notes consisting of $850 million due June 1, 2018, with a fixed interest rate of 1.75 percent; $1.05 billion due August 1, 2023, with a fixed interest rate of 3.25 percent; and $950 million due June 1, 2043, with a fixed interest rate of 4.75 percent (collectively, the Notes). Interest on the Notes is payable semi-annually in arrears. The Notes are subject to redemption at the company's discretion at any time, or from time to time, prior to maturity in whole or in part at the greater of the principal amount of the Notes or a "make-whole" amount, plus accrued and unpaid interest. The company used a portion of the net proceeds to fund the redemption of $350 million of the company's 3.70 percent unsecured senior notes due August 1, 2014, and $500 million of 1.85 percent unsecured senior notes due November 15, 2015. The company recorded a pre-tax charge of $30 million principally related to the premiums paid on the redemptions, which was recorded in other, net in the consolidated statements of earnings and comprehensive income.
Long-term debt consists of the following:
|
| | | | | | | | | | |
$ in millions | | | | December 31 |
2013 | | 2012 |
Fixed-rate notes and debentures, maturing in | | Interest rate | | | | |
2014 | | 3.70% | |
| $— |
| |
| $ 350 |
|
2015 | | 1.85% | | — |
| | 500 |
|
2016 | | 7.75% | | 107 |
| | 107 |
|
2018 | | 1.75% - 6.75% | | 1,050 |
| | 200 |
|
2019 | | 5.05% | | 500 |
| | 500 |
|
2021 | | 3.50% | | 700 |
| | 700 |
|
2023 | | 3.25% | | 1,050 |
| | — |
|
2026 | | 7.75% - 7.88% | | 527 |
| | 527 |
|
2031 | | 7.75% | | 466 |
| | 466 |
|
2040 | | 5.05% | | 300 |
| | 300 |
|
2043 | | 4.75% | | 950 |
| | — |
|
Capital leases | | Various | | 35 |
| | 32 |
|
Other | | Various | | 245 |
| | 253 |
|
Total long-term debt | | | | 5,930 |
| | 3,935 |
|
Less: current portion | | | | 2 |
| | 5 |
|
Long-term debt, net of current portion | | | |
| $5,928 |
| |
| $3,930 |
|
Indentures underlying long-term debt issued by the company or its subsidiaries contain various restrictions with respect to the issuer, including one or more restrictions relating to limitations on liens, sale-leaseback arrangements, and funded debt of subsidiaries. The majority of these fixed rate notes and debentures are subject to redemption at the company’s discretion at any time prior to maturity in whole or in part at the principal amount plus any make-whole premium and accrued and unpaid interest. Interest on these fixed rate notes and debentures are payable semi-annually in arrears.
Maturities of long-term debt as of December 31, 2013, are as follows:
|
| | | |
$ in millions | |
Year Ending December 31 | |
2014 |
| $ 2 |
|
2015 | 3 |
|
2016 | 110 |
|
2017 | 3 |
|
2018 | 1,053 |
|
Thereafter | 4,757 |
|
Total principal payments | 5,928 |
|
Unamortized premium on long-term debt, net of discount | 2 |
|
Total long-term debt |
| $5,930 |
|
The premium on long-term debt primarily represents non-cash fair market value adjustments resulting from acquisitions, which are amortized over the life of the related debt.
