Loans Payable And Other Financial Liabilities

3 Months Ended

Mar. 31, 2022

Loans Payable And Other Financial Liabilities [Abstract]

Loans Payable And Other Financial Liabilities

11. Loans payable and other financial liabilities

The following table summarizes the Company’s Loans payable and other financial liabilities as of March 31, 2022 and December 31, 2021:

							Book value as of
Type of instrument	Currency	Interest	Weighted Average Interest ‎Rate		Maturity		March 31, 2022		December 31, 2021
							(In millions)
Current loans payable and other financial liabilities:
Loans from banks
Chilean Subsidiary	Chilean Pesos	Fixed	8.04	%	April - June 2022	$	126	$	112
Brazilian Subsidiary	US Dollar	Variable	LIBOR 3M + 0.7408	%	April - July 2022		60		60
Brazilian Subsidiary	US Dollar	Fixed	1.30	%	December 2022		50		50
Brazilian Subsidiary	US Dollar	Fixed	1.70	%	November 2022		50		50
Mexican Subsidiary	Mexican Peso	Variable	TIIE + 2.20	%	May - November 2022		68		66
Uruguayan Subsidiary	Uruguayan Pesos	Fixed	6.69	%	June 2022		9		8
Uruguayan Subsidiary	Uruguayan Pesos	Fixed	7.15	%	April - July 2022		16		15
Colombian Subsidiary	Colombian Pesos	Fixed	7.30	%	June 2022		11		16
Chilean Subsidiary	Chilean Pesos	Fixed	8.16	%	April 2022		8		—
Chilean Subsidiary	Chilean Pesos	Fixed	2.46	%	April 2022 - March 2023		2		1
Secured lines of credit
Argentine Subsidiary	Argentine Pesos	Fixed	37.01	%	April 2022		37		44
Argentine Subsidiary	Argentine Pesos	Fixed	35.69	%	April 2022		26		25
Brazilian Subsidiary	Brazilian Reais				April 2022		16		—
Mexican Subsidiary	Mexican Peso	Fixed	10.08	%	April 2022 - March 2023		4		4
Unsecured lines of credit
Uruguayan Subsidiary	Uruguayan Pesos	Fixed	7.98	%	April 2022		26		27
Argentine Subsidiary	Argentine Pesos	Fixed	37.05	%	April 2022		97		115
Brazilian Subsidiary	Brazilian Reais	Fixed	1	%	April 2022		1		4
Deposit Certificates
Brazilian Subsidiary	Brazilian Reais	Variable	IPCA + 5.25 -7.15	%	February - March 2023		75		—
Brazilian Subsidiary	Brazilian Reais	Variable	99% to 126.5% of CDI		April 2022 - March 2023		455		518
Brazilian Subsidiary	Brazilian Reais	Fixed	7.65 - 13.30	%	April 2022 - March 2023		83		41
Brazilian Subsidiary	Brazilian Reais	Variable	CDI + 0.72-0.76	%	May - June 2022		105		23
2028 Notes							1		3
2026 Sustainability Notes							2		4
2031 Notes							5		10
Finance lease obligations							12		10
Collateralized debt							109		77
Other lines of credit							5		2
						$	1,459	$	1,285

‎

							Book value as of
Type of instrument	Currency	Interest	Weighted Average Interest ‎Rate		Maturity		March 31, 2022		December 31, 2021
							(In millions)
Non-Current loans payable and other financial liabilities:
2028 Notes							435		312
2026 Sustainability Notes							397		397
2031 Notes							694		694
Financial Bills
Brazilian Subsidiary	Brazilian Reais	Variable	CDI + 0.95 - 1.10	%	July 2023 - February 2024		111		92
Deposit Certificates
Brazilian Subsidiary	Brazilian Reais	Variable	106% to 129% of CDI		April 2023 - April 2024		17		3
Finance lease obligations							39		36
Collateralized debt							916		674
Loans from banks
Chilean Subsidiary	Chilean Pesos	Fixed	2.46	%	April 2023 - April 2025		3		4
Brazilian Subsidiary	Brazilian Reais	Variable	TJLP + 0.8	%	May 2024 - May 2031		5		4
Secured lines of credit
Mexican Subsidiary	Mexican Peso	Fixed	10.08	%	April 2023 - December 2026		17		17
Other lines of credit							4		-
						$	2,638	$	2,233

See Notes 12 and 13 to these interim condensed consolidated financial statements for details regarding the Company’s collateralized debt securitization transactions and finance lease obligations, respectively.

2.375% Sustainability Senior Notes Due 2026 and 3.125% Senior Notes Due 2031

On January 14, 2021, the Company closed a public offering of $400 million aggregate principal amount of 2.375% Sustainability Notes due 2026 (the “2026 Sustainability Notes”) and $700 million aggregate principal amount of 3.125% Notes due 2031 (the “2031 Notes”, and together with the 2026 Sustainability Notes, the “Notes”). The Company will pay interest on the Notes on January 14 and July 14 of each year, beginning on July 14, 2021. The 2026 Sustainability Notes will mature on January 14, 2026, and the 2031 Notes will mature on January 14, 2031. In connection with the Notes, the Company capitalized $11 million of debt issuance costs, which are amortized during the term of the Notes. The Company intends to allocate an amount equal to the net proceeds from the sale of the 2026 Sustainability Notes to finance or refinance Eligible Projects. “Eligible Projects” are investments and expenditures made by the Company beginning with the issuance date of the 2026 Sustainability Notes or in the 24 months prior to the issuance of the 2026 Sustainability Notes, that: (i) contribute to environmental objectives such as: clean transportation, land conservation and preservation, energy efficiency, renewable energy, green buildings and pollution prevention and control, (ii) aim to address or mitigate a specific social issue or seek to achieve positive social outcomes especially, but not exclusively, for one or more target populations or (iii) combine (i) and (ii).

Certain of the Company’s subsidiaries (the “Subsidiary Guarantors”) fully and unconditionally guarantee the payment of principal, premium, if any, interest, and all other amounts in respect of each of the Notes (the “Subsidiary Guarantees”). The initial Subsidiary Guarantors are MercadoLibre S.R.L., Ibazar.com Atividades de Internet Ltda., eBazar.com.br Ltda., Mercado Envios Servicos de Logistica Ltda., Mercado Pago Instituição de Pagamento Ltda. (formerly known as “MercadoPago.com Representações Ltda.”), MercadoLibre Chile Ltda., MercadoLibre, S.A. de C.V. (formerly known as “MercadoLibre, S. de R.L. de C.V.”), DeRemate.com de México, S. de R.L. de C.V. and MercadoLibre Colombia Ltda. On October 27, 2021, MercadoLibre, S.A. de C.V. became an excluded subsidiary pursuant to the terms of the Notes and it was released from its Subsidiary Guaranty. On October 27, 2021, MP Agregador, S. de R.L. de C.V. became a Subsidiary Guarantor under the Notes.

The Notes rank equally in right of payment with all of the Company’s other existing and future senior unsecured debt obligations from time to time outstanding. Each Subsidiary Guarantee will rank equally in right of payment with all of the Subsidiary Guarantor’s other existing and future senior unsecured debt obligations from time to time outstanding, except for statutory priorities under applicable local law.

2.00% Convertible Senior Notes Due 2028

On August 24, 2018, the Company issued $800 million of 2.00% Convertible Senior Notes due 2028 and issued an additional $80 million of notes on August 31, 2018 pursuant to the partial exercise of the initial purchasers’ option to purchase such additional notes, for an aggregate principal amount of $880 million of 2.00% Convertible Senior Notes due 2028 (collectively, the “2028 Notes”). The 2028 Notes are unsecured, unsubordinated obligations of the Company, which pay interest in cash semi-annually, on February 15 and August 15 of each year, at a rate of 2.00% per annum. The 2028 Notes will mature on August 15, 2028 unless earlier redeemed, repurchased or converted in accordance with their terms prior to such date. The 2028 Notes may be converted, under specific conditions, based on an initial conversion rate of 2.2553 shares of common stock per $1,000 principal amount of the 2028 Notes (equivalent to an initial conversion price of $443.40 per share of common stock), subject to adjustment as described in the indenture governing the 2028 Notes. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election. As of March 31, 2022, the principal and issuance costs of the 2028 Notes amounted to $439 million and $4 million, respectively. For additional information regarding the 2028 Notes please refer to Note 2 and Note 16 to the audited consolidated financial statements for the year ended December 31, 2021, contained in the Company’s Annual Report on Form 10-K filed with the SEC.

During the three-month period ended March 31, 2022, 2 Notes were converted, for a total amount of $2 thousand. The determination of whether or not the Notes are convertible must be performed on a quarterly basis. The Company reconfirmed during the first quarter of 2022 that the conversion threshold was met and the Notes remain eligible for conversion. As of the date of issuance of these interim condensed consolidated financial statements, the Company did not receive additional requests for conversion.

The Company has entered into capped call transactions with respect to shares of its common stock with certain financial institutions (the “2028 Notes Capped Call Transactions”). The 2028 Notes Capped Call Transactions are expected generally to reduce the potential dilution upon conversion of the 2028 Notes in the event that the market price of the Company’s common stock is greater than the strike price and lower than the cap price of the 2028 Notes Capped Call Transactions. The amounts the Company has paid, including transaction expenses, are $92 million (August 2018), $11 million (November 2018), $88 million (June 2019), $104 million (June 2020), $83 million (August 2020), $120 million (November 2020) and $101 million (January 2021). In addition, the Company paid $8 million in November 2019 to amend the strike and cap prices of the capped call transaction purchased in November 2018. The cost of the 2028 Notes Capped Call Transactions is included as a net reduction to additional paid-in capital in the stockholders’ equity section of the consolidated balance sheets. In June and August 2021, the Company terminated certain of its 2028 Notes Capped Call Transactions and received as consideration $102 million in cash and 57,047 shares of Common Stock, and $294 million in cash and 89,978 shares of Common Stock, respectively. Cash proceeds of terminating certain of the 2028 Notes Capped Call Transactions in June and August 2021 were used to repurchase 71,175 shares and 158,413 shares of Common Stock, respectively.

In January 2021, the Company repurchased $440 million principal amount of the outstanding of the 2028 Notes. The total amount paid amounted to $1,865 million, which includes principal, interest accrued and premium. The settlement consideration was first allocated to the extinguishment of the liability component of the 2028 Notes repurchased. The difference of $30 million between the fair value of the liability component and the net carrying amount of the liability component and unamortized debt issuance costs was recognized as a loss on debt extinguishment; in addition, $19 million paid as a premium was recognized as a loss in Interest expense and other financial losses line in the consolidated statement of income in January 2021. The remaining consideration of $1,484 million (net of income tax effects) was allocated to the reacquisition of the equity component and recognized as a reduction of stockholders’ equity.

The total estimated fair value of the 2028 Notes was $1,220 million and $1,367 million as of March 31, 2022 and December 31, 2021, respectively. The fair value was determined based on the closing trading price per $100 principal amount of the 2028 Notes as of the last day of trading for the period. The Company considered the fair value of the 2028 Notes as of March 31, 2022 and December 31, 2021 to be a Level 2 measurement. The fair value of the 2028 Notes is primarily affected by the trading price of the Company’s common stock and market interest rates. Based on the $1,189.48 closing price of the Company’s common stock on March 31, 2022, the if-converted value of the 2028 Notes exceeded their principal amount by $739 million.

‎

Revolving Credit Agreement

On March 31, 2022, the Company, as borrower, entered into a $400 million revolving credit agreement (the “Credit Agreement”). Under the Credit Agreement, the Company’s subsidaries MercadoLibre S.R.L., Ebazar.com.br Ltda, Ibazar.com Atividades De Internet Ltda., Mercado Envios Serviços de Logística Ltda., Mercado Pago Instituição de Pagamento Ltda., Deremate.com de Mexico S. de R.L. de C.V., MP Agregador, S. de R.L. de C.V., Mercado Libre Chile Ltda., and Mercadolibre Colombia Ltda have guaranteed the Company’s obligations.

The interest rates under the Credit Agreement are based on Adjusted Term SOFR (“Secured Overnight Funding Rate”) plus an interest margin of 1.25% per annum. Any loans drawn under the Credit Agreement must be repaid on or prior to March 31, 2025. The Company is also obligated to pay a commitment fee on the unused amounts of the facility at an annual rate of 0.3125%.

As of March 31, 2022, no amounts have been borrowed under the facility.