NOTE 8

DEBT, CREDIT FACILITIES AND LEASE COMMITMENTS

Debt Outstanding

At December 31, 2015 and 2014, the company had the following debt outstanding:


as of December 31 (in millions)		2015			2014

Line of credit			$1,450		$	—
Commercial paper			300			875
Other short-term debt			25			38

Short-term debt			$1,775		$	913


as of December 31 (in millions)	Effective interest rate in 2015¹	2015²			2014²

Variable-rate loan due 2015	0.7%		—			171
4.625% notes due 2015	5.8%		—			604
5.9% notes due 2016	6.0%		302			614
0.95% notes due 2016	1.1%		500			500
1.85% notes due 2017	2.0%		500			500
Variable-rate loan due 2017	1.1%		—			120
5.375% notes due 2018	5.5%		502			500
1.85% notes due 2018	2.0%		750			750
4.5% notes due 2019	4.6%		531			535
4.25% notes due 2020	4.4%		299			299
Variable-rate loan due 2020	0.7%		281			—
2.40% notes due 2022	2.6%		212			723
3.2% notes due 2023	3.6%		147			1,275
6.625% debentures due 2028	6.2%		101			132
6.25% notes due 2037	6.4%		266			499
3.65% notes due 2042	4.0%		6			298
4.5% notes due 2043	4.6%		257			500
Other	—		91			96

Total debt and capital lease obligations			4,745			8,116
Current portion			(810	)		(785	)

Long-term portion			$3,935		$	7,331

¹	Excludes the effect of any related interest rate swaps.

²	Book values include any discounts, premiums and adjustments related to hedging instruments.

Significant Debt Issuances

In June 2015, the company’s then wholly-owned subsidiary Baxalta issued senior notes with a total aggregate principal amount of $5.0 billion. Approximately $4.0 billion of the related net proceeds were distributed to Baxter in connection with the separation. After the separation, Baxter has no obligations as it relates to the Baxalta senior notes or any other Baxalta indebtedness. Refer to the debt tender offer section below in connection with this debt issuance. In June 2013, the company issued $500 million of floating rate senior notes maturing in December 2014, $500 million of senior notes bearing a coupon rate of 0.95% and maturing in June 2016, $750 million of senior notes bearing a coupon rate of 1.85% and maturing in June 2018, $1.25 billion of senior notes bearing a coupon rate of 3.2% and maturing in June 2023, and $500 million of senior notes bearing a coupon rate of 4.5% and maturing in June 2043. Approximately $3.0 billion of the net proceeds from the June 2013 debt issuances were used to finance the acquisition of Gambro in 2013 and the remainder was used for general corporate purposes, including the repayment of commercial paper.

Debt Tender Offer

On July 6, 2015 and July 21, 2015 the company purchased an aggregate of approximately $2.7 billion in principal amount of its 5.900% Notes due September 2016, 6.625% Debentures due February 2028, 6.250% Notes due December 2037, 3.650% Notes due August 2042, 4.500% Notes due June 2043, 3.200% Notes due June 2023, and 2.400% Notes due August 2022 pursuant to a debt tender offer. Baxter paid approximately $2.9 billion, including accrued and unpaid interest and tender premium, to purchase such notes. As a result of the debt tender offers the company recognized a loss on extinguishment of debt in the third quarter of 2015 of $130 million, which is included in other expense (income), net within the Consolidated Statements of Income.

Credit Facilities

As of December 31, 2015, the company has drawn $1.45 billion under its $1.8 billion U.S. dollar-denominated revolving credit facility at a weighted average interest rate of 1.41%. This facility was entered into in 2014, and in the fourth quarter of 2015, the company extended the scheduled maturity date to March 2016. On January 27, 2016, Baxter exchanged shares of Baxalta common stock for the $1.45 billion aggregate principal amount outstanding under its revolving credit facility. This exchange extinguished the indebtedness under the facility. There were no material prepayment penalties or breakage costs or fees associated with the termination of the facility. In connection with the exchange of Baxalta common stock, Baxter will recognize approximately $1.2 billion of realized gains in the first quarter of 2016.

Effective July 1, 2015, the company terminated its $1.5 billion U.S. dollar-denominated revolving credit facility and €300 million Euro denominated revolving credit facility and entered into credit agreements providing for a senior U.S. dollar-denominated revolving credit facility in an aggregate principal amount of up to $1.5 billion maturing in 2020, as well as a Euro-denominated senior revolving credit facility in an aggregate principal amount of up to €200 million maturing in 2020. As of December 31, 2014 there were no borrowings outstanding under any of the company’s revolving credit facilities. The facilities enable the company to borrow funds on an unsecured basis at variable interest rates, and contain various covenants, including a maximum net leverage ratio and maximum interest coverage ratio.

The company also maintains other credit arrangements, which totaled $307 million at December 31, 2015 and $329 million at December 31, 2014. Borrowings outstanding under these facilities totaled $25 million at December 31, 2015 and $38 million at December 31, 2014.

At December 31, 2015, the company was in compliance with the financial covenants in these agreements. The non-performance of any financial institution supporting any of the credit facilities would reduce the maximum capacity of these facilities by each institution’s respective commitment.

Commercial Paper

During 2015, the company issued and redeemed commercial paper, and there was $300 million outstanding at December 31, 2015 with a weighted-average interest rate of 0.6%. There was a balance of $875 million outstanding at December 31, 2014 with a weighted-average interest rate of 0.456%.

Leases

The company leases certain facilities and equipment under capital and operating leases expiring at various dates. The leases generally provide for the company to pay taxes, maintenance, insurance and certain other operating costs of the leased property. Most of the operating leases contain renewal options. For the years ending December 31, 2015, 2014, and 2013 operating lease rent expense was $184 million, $203 million, and $174 million, respectively.

Future Minimum Lease Payments and Debt Maturities


as of and for the years ended December 31 (in millions)	Operating leases	Debt maturities and capital leases
2016	$149		$ 810
2017	125		520
2018	106		1,258
2019	86		508
2020	72		589
Thereafter	176		1,082

Total obligations and commitments	714		4,767
Interest on capital leases, discounts and premiums, and adjustments relating to hedging instruments	—		(22	)

Total debt and lease obligations	$714		$4,745