Borrowings and Lines of Credit

9 Months Ended

Sep. 30, 2020

Borrowings and Lines of Credit [Text Block]

Borrowings and Lines of Credit


(dollars in millions)	September 30, 2020		December 31, 2019
Commercial paper	$	160	$	—
Other borrowings	68		2,293
Total short-term borrowings	$	228	$	2,293

As of September 30, 2020, our maximum commercial paper borrowing limit was $5.0 billion as the commercial paper is backed by our $5.0 billion revolving credit agreement. We use our commercial paper borrowings for general corporate purposes, including the funding of potential acquisitions, pension contributions, debt refinancing, dividend payments and repurchases of our common stock. The commercial paper notes outstanding have original maturities of not more than 90 days from the date of issuance.

In preparation for and in anticipation of the Separation Transactions, the Distributions and the Raytheon Merger, the Company entered into and terminated a number of credit agreements.

On February 11, 2020 and March 3, 2020, we terminated a $2.0 billion revolving credit agreement and a $4.0 billion term loan credit agreement, respectively. Upon termination, we repaid the $2.1 billion of borrowings outstanding on the $4.0 billion term loan credit agreement. On April 3, 2020, upon the completion of the Raytheon Merger, we terminated a $2.20 billion revolving credit agreement and a $2.15 billion multicurrency revolving credit agreement.

On March 20, 2020 and March 23, 2020, we entered into two $500 million term loan credit agreements and borrowed $1.0 billion under these agreements in the first quarter of 2020. We terminated these agreements on May 5, 2020 and April 28, 2020, respectively, upon repayment.

On March 16, 2020, we entered into a revolving credit agreement with various banks permitting aggregate borrowings of up to $5.0 billion which became available upon completion of the Raytheon Merger on April 3, 2020. This credit agreement matures on April 3, 2025. On May 6, 2020, we entered into a revolving credit agreement with various banks permitting aggregate borrowings of up to $2.0 billion. This credit agreement matures on May 5, 2021. As of September 30, 2020 we had revolving credit agreements with various banks permitting aggregate borrowings of up to $7.0 billion.

In preparation for and in anticipation of the Separation Transactions and Distributions, the Company, Otis and Carrier issued and the Company repaid long-term debt in the nine months ended September 30, 2020, which are included in the tables below. On February 10, 2020, Otis entered into a term loan credit agreement providing for a $1.0 billion unsecured, unsubordinated 3-year term loan credit facility. Also on February 10, 2020, Carrier entered into a term loan credit agreement providing for a $1.75 billion unsecured, unsubordinated 3-year term loan credit facility. On March 27, 2020, Otis and Carrier drew on the full amounts of the term loans and distributed the full proceeds to Raytheon Technologies in connection with the Separation Transactions. UTC utilized those amounts to extinguish Raytheon Technologies’ short-term and long-term debt in order to not exceed the maximum applicable net indebtedness required by the Raytheon Merger Agreement.

We had the following issuances of long-term debt during the nine months ended September 30, 2020, which is inclusive of issuances made by Otis and Carrier which were primarily used by the Company to extinguish Raytheon Technologies short-term and long-term debt, and therefore were treated as a distribution from discontinued operations within financing activities from continuing operation on our Condensed Consolidated Statement of Cash Flows:


(dollars in millions)
Issuance Date	Description of Notes	Aggregate Principal Balance
May 18, 2020	2.250% notes due 2030	$	1,000
	3.125% notes due 2050	1,000
March 27, 2020	Term Loan due 2023 (Otis)⁽¹⁾	1,000
	Term Loan due 2023 (Carrier)⁽¹⁾	1,750
February 27, 2020	1.923% notes due 2023 ⁽¹⁾	500
	LIBOR plus 0.450% floating rate notes due 2023 ⁽¹⁾	500
	2.056% notes due 2025 ⁽¹⁾	1,300
	2.242% notes due 2025⁽¹⁾	2,000
	2.293% notes due 2027⁽¹⁾	500
	2.493% notes due 2027⁽¹⁾	1,250
	2.565% notes due 2030⁽¹⁾	1,500
	2.722% notes due 2030⁽¹⁾	2,000
	3.112% notes due 2040 ⁽¹⁾	750
	3.377% notes due 2040 ⁽¹⁾	1,500
	3.362% notes due 2050 ⁽¹⁾	750
	3.577% notes due 2050 ⁽¹⁾	2,000
				$	19,300

(1) The debt issuances and term loan draws reflect debt incurred by Otis and Carrier. The net proceeds of these issuances were primarily utilized to extinguish Raytheon Technologies short-term and long-term debt in order to not exceed the maximum applicable net indebtedness required by the Raytheon Merger Agreement.

We had no issuances of long-term debt during the nine months ended September 30, 2019.

We had the following repayments of long-term debt during the nine months ended September 30, 2020 and 2019:


(dollars in millions)
Repayment Date	Description of Notes	Aggregate Principal Balance
May 19, 2020	3.650% notes due 2023 ⁽¹⁾⁽²⁾	$	410
May 15, 2020	EURIBOR plus 0.20% floating rate notes due 2020 (€750 million principal value)⁽²⁾	817
March 29, 2020	4.500% notes due 2020 ⁽¹⁾⁽²⁾	1,250
	1.125% notes due 2021 (€950 million principal value) ⁽¹⁾⁽²⁾	1,082
	1.250% notes due 2023 (€750 million principal value) ⁽¹⁾⁽²⁾	836
	1.150% notes due 2024 (€750 million principal value) ⁽¹⁾⁽²⁾	841
	1.875% notes due 2026 (€500 million principal value) ⁽¹⁾⁽²⁾	567
March 3, 2020	1.900% notes due 2020 ⁽¹⁾⁽²⁾	1,000
	3.350% notes due 2021 ⁽¹⁾⁽²⁾	1,000
	LIBOR plus 0.650% floating rate notes due 2021 ⁽¹⁾⁽²⁾	750
	1.950% notes due 2021 ⁽¹⁾⁽²⁾	750
	2.300% notes due 2022 ⁽¹⁾⁽²⁾	500
	3.100% notes due 2022 ⁽¹⁾⁽²⁾	2,300
	2.800% notes due 2024 ⁽¹⁾⁽²⁾	800
March 2, 2020	4.875% notes due 2020 ⁽¹⁾⁽²⁾	171
February 28, 2020	3.650% notes due 2023 ⁽¹⁾⁽²⁾	1,669
	2.650% notes due 2026 ⁽¹⁾⁽²⁾	431
Total debt repayments during the nine months ended September 30, 2020				$	15,174





July 15, 2019	1.950% notes due 2019	300
	5.250% notes due 2019	300
Total debt repayments during the nine months ended September 30, 2019				$	600

(1) In connection with the early repayment of outstanding principal, Raytheon Technologies recorded debt extinguishment costs of $703 million for the nine months ended September 30, 2020, which are classified as discontinued operations in our Condensed Consolidated Statement of Operations as we would not have had to redeem the debt, except for the Separation Transactions. No proceeds of the notes issued May 18, 2020 were used to fund the May 19, 2020 redemption.

(2) Extinguishment of Raytheon Technologies short-term and long-term debt in order to not exceed the maximum net indebtedness required by the Raytheon Merger Agreement.

On June 10, 2020, we completed an exchange offer with eligible holders of the outstanding notes of Goodrich Corporation maturing through 2046, Raytheon Company maturing through 2044 and Rockwell Collins Inc. maturing through 2047 (collectively, the “Subsidiary Notes”). An aggregate principal amount of approximately $8.2 billion of the Subsidiary Notes was exchanged for approximately $8.2 billion of Raytheon Technologies notes with identical interest rates, maturity dates, and redemption provisions, if any, as the Subsidiary Notes exchanged. Because the exchange was for substantially identical notes, the change was treated as a debt modification for accounting purposes with no gain or loss recognized.

Long-term debt consisted of the following:


(dollars in millions)	September 30, 2020		December 31, 2019
4.875% notes due 2020	$	—	$	171
4.500% notes due 2020	—		1,250
1.900% notes due 2020	—		1,000
EURIBOR plus 0.20% floating rate notes due 2020 (€750 million principal value)	—		831
3.125% notes due 2020 ⁽²⁾	1,000		—
8.750% notes due 2021	250		250
3.100% notes due 2021	250		250
3.350% notes due 2021	—		1,000
LIBOR plus 0.650% floating rate notes due 2021	—		750
1.950% notes due 2021	—		750


1.125% notes due 2021 (€950 million principal value)	—	1,053
2.300% notes due 2022	—	500
2.800% notes due 2022	1,100	1,100
3.100% notes due 2022	—	2,300
2.500% notes due 2022 ⁽²⁾	1,100	—
1.250% notes due 2023 (€750 million principal value)	—	831
3.650% notes due 2023 ⁽¹⁾	171	2,250
3.700% notes due 2023	400	400
2.800% notes due 2024	—	800
3.200% notes due 2024	950	950
1.150% notes due 2024 (€750 million principal value)	—	831
3.150% notes due 2024 ⁽²⁾	300	—
3.950% notes due 2025 ⁽¹⁾	1,500	1,500
1.875% notes due 2026 (€500 million principal value)	—	554
2.650% notes due 2026 ⁽¹⁾	719	1,150
3.125% notes due 2027 ⁽¹⁾	1,100	1,100
3.500% notes due 2027	1,300	1,300
7.200% notes due 2027 ⁽²⁾	382	—
7.100% notes due 2027	141	141
6.700% notes due 2028	400	400
7.000% notes due 2028 ⁽²⁾	185	—
4.125% notes due 2028 ⁽¹⁾	3,000	3,000
7.500% notes due 2029 ⁽¹⁾	550	550
2.150% notes due 2030 (€500 million principal value) ⁽¹⁾	583	554
2.250% notes due 2030 ⁽¹⁾	1,000	—
5.400% notes due 2035 ⁽¹⁾	600	600
6.050% notes due 2036 ⁽¹⁾	600	600
6.800% notes due 2036 ⁽¹⁾	134	134
7.000% notes due 2038	159	159
6.125% notes due 2038 ⁽¹⁾	1,000	1,000
4.450% notes due 2038 ⁽¹⁾	750	750
5.700% notes due 2040 ⁽¹⁾	1,000	1,000
4.875% notes due 2040 ⁽²⁾	600	—
4.700% notes due 2041 ⁽²⁾	425	—
4.500% notes due 2042 ⁽¹⁾	3,500	3,500
4.800% notes due 2043	400	400
4.200% notes due 2044 ⁽²⁾	300	—
4.150% notes due 2045 ⁽¹⁾	850	850
3.750% notes due 2046 ⁽¹⁾	1,100	1,100
4.050% notes due 2047 ⁽¹⁾	600	600
4.350% notes due 2047	1,000	1,000
4.625% notes due 2048 ⁽¹⁾	1,750	1,750


3.125% notes due 2050 ⁽¹⁾	1,000	—
Other (including finance leases)	299	315
Total principal long-term debt	32,448	41,274
Other (fair market value adjustments, (discounts)/premiums, and debt issuance costs)	105	(315)
Total long-term debt	32,553	40,959
Less: current portion	1,307	3,258


Long-term debt, net of current portion			$	31,246					$	37,701

(1) We may redeem these notes at our option pursuant to their terms.

(2) Debt assumed in the Raytheon Merger.

The average maturity of our long-term debt at September 30, 2020 is approximately 14 years. The average interest expense rate on our total borrowings for the quarters and nine months ended September 30, 2020 and 2019 was as follows:


	Quarter Ended September 30,						Nine Months Ended September 30,
	2020		2019		2020		2019
Average interest expense rate	4.2	%	3.6	%	4.0	%	3.7	%

In the fourth quarter of 2020, we repaid the $1.0 billion of debt that matured on October 15, 2020, using cash on hand.