Long-Term Debt and Other Financing Arrangements

12 Months Ended

May 31, 2023

Debt and Lease Obligation [Abstract]

Long-term Debt and Other Financing Arrangements

NOTE 6: LONG-TERM DEBT AND OTHER FINANCING ARRANGEMENTS

The components of long-term debt (net of discounts and debt issuance costs), along with maturity dates for the years subsequent to May 31, 2023, are as follows (in millions):

				May 31,
				2023		2022
	Interest Rate %		Maturity
Senior secured debt:
		1.875	2034	$	831	$	881
Senior unsecured debt:
		3.25	2026		748		747
		3.40	2028		497		497
		4.20	2029		398		397
	3.10-4.25		2030		1,737		1,735
		2.40	2031		991		990
		4.90	2034		496		496
		3.90	2035		495		495
		3.25	2041		740		740
	3.875-4.10		2043		985		985
		5.10	2044		743		742
		4.10	2045		641		641
	4.55-4.75		2046		2,463		2,462
		4.40	2047		736		736
		4.05	2048		987		987
		4.95	2049		836		836
		5.25	2050		1,226		1,226
		4.50	2065		246		246
		7.60	2098		237		237
Euro senior unsecured debt:
		0.45	2026		537		533
		1.625	2027		1,341		1,332
		0.45	2029		641		637
		1.30	2032		534		530
		0.95	2033		693		688
Total senior unsecured debt					18,948		18,915
Finance lease obligations					800		468
					20,579		20,264
Less current portion					126		82
				$	20,453	$	20,182

Interest on our U.S. dollar fixed-rate notes is paid semi-annually. Interest on our euro fixed-rate notes is paid annually. The weighted-average interest rate on long-term debt was 3.5% as of May 31, 2023. Long-term debt, including current maturities and exclusive of finance leases, had estimated fair values of $17.5 billion at May 31, 2023 and $18.8 billion at May 31, 2022. The estimated fair values were determined based on quoted market prices and the current rates offered for debt with similar terms and maturities. The fair value of our long-term debt is classified as Level 2 within the fair value hierarchy. This classification is defined as a fair value determined using market-based inputs other than quoted prices that are observable for the liability, either directly or indirectly.

We have a shelf registration statement filed with the Securities and Exchange Commission (“SEC”) that allows us to sell, in one or more future offerings, any combination of our unsecured debt securities and common stock and allows pass-through trusts formed by FedEx Express to sell, in one or more future offerings, pass-through certificates.

FedEx Express has issued $970 million of Pass-Through Certificates, Series 2020-1AA (the “Certificates”) with a fixed interest rate of 1.875% due in February 2034 utilizing pass-through trusts. The Certificates are secured by 19 Boeing aircraft with a net book value of $1.7 billion at May 31, 2023. The payment obligations of FedEx Express in respect of the Certificates are fully and unconditionally guaranteed by FedEx. FedEx Express is using the proceeds from the issuance for general corporate purposes.

The following table sets forth the future scheduled principal payments due by fiscal year on our long-term debt (in millions):

	Debt Principal
2024	$	52
2025		52
2026		1,340
2027		1,398
2028		552
Thereafter		16,606
Subtotal		20,000
Discount and debt issuance costs		(221	)
Total debt	$	19,779

We have a $2.0 billion five-year credit agreement (the “Five-Year Credit Agreement”) and a $1.5 billion three-year credit agreement (the “Three-Year Credit Agreement” and together with the Five-Year Credit Agreement, the “Credit Agreements”). The Five-Year Credit Agreement expires in March 2026 and includes a $250 million letter of credit sublimit. The Three-Year Credit Agreement expires in March 2025. The Credit Agreements are available to finance our operations and other cash flow needs. As of May 31, 2023, no amounts were outstanding under the Credit Agreements, no commercial paper was outstanding, and $250 million of the letter of credit sublimit was unused under the Five-Year Credit Agreement. Outstanding commercial paper reduces the amount available to borrow under the Credit Agreements.

Our Credit Agreements contain a financial covenant requiring us to maintain a ratio of debt to consolidated earnings (excluding noncash retirement plans MTM adjustments, noncash pension service costs, and noncash asset impairment charges) before interest, taxes, depreciation, and amortization (“adjusted EBITDA”) of not more than 3.5 to 1.0, calculated as of the last day of each fiscal quarter on a rolling four-quarters basis. The ratio of our debt to adjusted EBITDA was 2.08 to 1.0 at May 31, 2023.

The financial covenant discussed above is the only significant restrictive covenant in the Credit Agreements. The Credit Agreements contain other customary covenants that do not, individually or in the aggregate, materially restrict the conduct of our business. We are in compliance with the financial covenant and all other covenants in the Credit Agreements and do not expect the covenants to affect our operations, including our liquidity or expected funding needs. If we failed to comply with the financial covenant or any other covenants in the Credit Agreements, our access to financing could become limited.