9. Debt

Short-Term Debt

The components of short-term debt were as follows:


			December 31, 2018
	Financing				Short-term debt
Obligor/Applicant	structure	Maturity	Capacity		outstanding
			(in millions)
PFG, Principal Financial Services, Inc. ("PFS"),
Principal Life as co-borrowers	Credit facility	November 2023	$	600.0	$	—
PFG, PFS, Principal Life and Principal Financial
Services V (UK) LTD as co-borrowers	Credit facility	November 2023		200.0		—
Principal International Chile	Unsecured lines of credit			141.4		42.9
Principal Life	Unsecured line of credit	September 2019		60.0		—
Total			$	1,001.4	$	42.9


			December 31, 2017
	Financing				Short-term debt
Obligor/Applicant	structure	Maturity	Capacity		outstanding
			(in millions)
PFG, PFS, Principal Life as co-borrowers	Credit facility	March 2022	$	600.0	$	—
PFG, PFS, Principal Life and Principal Financial
Services V (UK) LTD as co-borrowers	Credit facility	March 2022		189.0		—
PFG, PFS, Principal Life and Principal Financial
Services V (UK) LTD as co-borrowers	Credit facility	March 2020		11.0		—
Principal International Chile	Unsecured lines of credit			107.3		39.5
Principal Life	Unsecured line of credit	December 2018		45.0		—
Total			$	952.3	$	39.5

Our revolving credit facilities are committed and available for general corporate purposes. Our commercial paper programs require 100% back-stop support, of which we had no outstanding balances as of December 31, 2018 and 2017. The weighted-average interest rate on short-term borrowings as of December 31, 2018 and 2017, was 3.9% and 4.7%, respectively.

Long-Term Debt

The components of long-term debt were as follows:


	December 31, 2018
	Principal		Net unamortized discount, premium and debt issuance costs		Carrying amount
	(in millions)

3.3% notes payable, due 2022	$	300.0	$	(1.5)	$	298.5
3.125% notes payable, due 2023		300.0		(1.2)		298.8
3.4% notes payable, due 2025		400.0		(3.0)		397.0
3.1% notes payable, due 2026		350.0		(2.7)		347.3
6.05% notes payable, due 2036		505.6		(2.6)		503.0
4.625% notes payable, due 2042		300.0		(3.3)		296.7
4.35% notes payable, due 2043		300.0		(3.3)		296.7
4.3% notes payable, due 2046		300.0		(3.3)		296.7
4.7% notes payable, due 2055		400.0		(4.9)		395.1
Non-recourse mortgages and notes payable		128.5		1.3		129.8
Total long-term debt	$	3,284.1	$	(24.5)	$	3,259.6


	December 31, 2017
	Principal		Net unamortized discount, premium and debt issuance costs		Carrying amount
	(in millions)
3.3% notes payable, due 2022	$	300.0	$	(1.9)	$	298.1
3.125% notes payable, due 2023		300.0		(1.5)		298.5
3.4% notes payable, due 2025		400.0		(3.5)		396.5
3.1% notes payable, due 2026		350.0		(3.1)		346.9
6.05% notes payable, due 2036		505.6		(2.7)		502.9
4.625% notes payable, due 2042		300.0		(3.3)		296.7
4.35% notes payable, due 2043		300.0		(3.4)		296.6
4.3% notes payable, due 2046		300.0		(3.4)		296.6
4.7% notes payable, due 2055		400.0		(5.0)		395.0
Non-recourse mortgages and notes payable		49.0		1.6		50.6
Total long-term debt	$	3,204.6	$	(26.2)	$	3,178.4

Net discount, premium and issuance costs associated with issuing these notes are amortized to expense over the respective terms using the interest method.

On November 10, 2016, we issued $650.0 million of senior notes. We issued a $350.0 million series of notes that bear interest at 3.1% and will mature in 2026 and a $300.0 million series of notes that bear interest at 4.3% and will mature in 2046. Interest on the notes is payable semi-annually on May 15 and November 15 each year, beginning on May 15, 2017. The proceeds from these notes were used to redeem our notes payable due in 2017 and 2019. We incurred a one-time cost to extinguish this debt before the scheduled maturity date.

On May 7, 2015, we issued $400.0 million of senior notes. The notes bear interest at 3.4% and will mature in 2025. Interest on the notes is payable semi-annually on May 15 and November 15 each year, beginning on November 15, 2015. In addition, on May 7, 2015, we issued $400.0 million of junior subordinated notes, which are subordinated to all our senior debt. The notes are callable in 2020 and have a maturity date in 2055. The notes initially bear a fixed rate of interest at 4.7% and convert to a floating rate at the date the notes become callable. Interest on the notes is payable semi-annually on May 15 and November 15 each year. After the call date the notes will bear interest at 3-month LIBOR plus 3.044%, reset quarterly and payable in arrears in February, May, August and November each year. We have the right to defer interest payments on the junior subordinated notes for up to 5 years without resulting in a default, during which time interest will be compounded. The proceeds from these notes were used to redeem preferred stock, with the remainder available for general corporate purposes.

On November 16, 2012, we issued $900.0 million of senior notes. We issued a $300.0 million series of notes that bore interest at 1.85% and were to mature in 2017. These notes were repaid following our November 2016 debt issuance. We issued a $300.0 million series of notes that bear interest at 3.125% and will mature in 2023 and a $300.0 million series of notes that bear interest at 4.35% and will mature in 2043. Interest on the notes is payable semi-annually on May 15 and November 15 each year, beginning on May 15, 2013. The proceeds were used to fund our acquisition of Cuprum.

On September 5, 2012, we issued $600.0 million of senior notes. We issued a $300.0 million series of notes that bear interest at 3.3% and will mature in 2022 and a $300.0 million series of notes that bear interest at 4.625% and will mature in 2042. Interest on the notes is payable semi-annually on March 15 and September 15 each year, beginning on March 15, 2013. The proceeds were used for the repayment of the $400.0 million aggregate principal amount of notes due in 2014 and to partially fund our acquisition of Cuprum.

On May 18, 2009, we issued $750.0 million of senior notes. We issued a $400.0 million series of notes that bore interest at 7.875% and were to mature on May 15, 2014. These notes were repaid following our November 2012 debt issuance. We issued a $350.0 million series of notes that bore interest at 8.875% and were to mature on May 15, 2019. These notes were repaid following our November 2016 debt issuance. Interest on the notes was payable semi-annually on May 15 and November 15 each year, beginning on November 15, 2009. The proceeds were primarily used to refinance $440.9 million of notes that matured on August 15, 2009, with the remaining proceeds being used for general corporate purposes.

On October 16 and December 5, 2006, we issued $500.0 million and $100.0 million, respectively, of senior notes. The notes bear interest at a rate of 6.05% per year. Interest on the notes is payable semi-annually on April 15 and October 15 each year and began on April 15, 2007. The notes will mature on October 15, 2036. A portion of the proceeds were used to fund the 2006 acquisition of WM Advisors, Inc., with the remaining proceeds being used for general corporate purposes. A tender offer in the fourth quarter of 2016 resulted in redemption of $94.4 million of the senior notes. We incurred a one-time cost to extinguish this debt before the scheduled maturity date.

The non-recourse mortgages and notes payable are primarily financings for real estate developments. Outstanding principal balances as of December 31, 2018, ranged from $3.8 million to $58.4 million per development with interest rates ranging from 3.9% to 4.8%. Outstanding principal balances as of December 31, 2017, ranged from $2.8 million to $16.4 million per development with interest rates ranging from 3.9% to 4.8%. Outstanding debt is secured by the underlying real estate properties, which were reported as real estate on our consolidated statements of financial position with a carrying value of $307.3 million and $179.6 million as of December 31, 2018 and 2017, respectively.

As of December 31, 2018, future annual maturities of long-term debt were as follows (in millions):


Year ending December 31:
2019	$	26.7
2020		59.8
2021		—
2022		298.5
2023		298.8
Thereafter		2,575.8
Total future maturities of long-term debt	$	3,259.6

Contingent Funding Agreements for Senior Debt Issuance

On March 8, 2018, we entered into two contingent funding agreements: (1) a 10-year contingent funding agreement with a Delaware trust (“2028 Trust”) formed by us in connection with the sale by the trust of $400.0 million pre-capitalized trust securities redeemable February 15, 2028 ("2028 P-Caps") in a Rule 144A private placement and (2) a 30-year contingent funding agreement with a Delaware trust (“2048 Trust”) formed by us in connection with the sale by the trust of $350.0 million pre-capitalized trust securities redeemable February 15, 2048 ("2048 P-Caps") in a Rule 144A private placement. The trusts invested the proceeds from the sale of the 2028 P-Caps and 2048 P-Caps in a portfolio of principal and interest strips of U.S. Treasury securities. The contingent funding agreements provide us a put option that gives us the right to sell at any time: (1) to the 2028 Trust up to $400.0 million of its 4.111% Senior Notes due 2028 ("4.111% Senior Notes") and (2) to the 2048 Trust up to $350.0 million of its 4.682% Senior Notes due 2048 (“4.682% Senior Notes”) and receive in exchange a corresponding amount of the principal and interest strips of U.S. Treasury securities held by the trusts. The 4.111% Senior Notes and 4.682% Senior Notes will not be issued unless and until a put option is exercised. We agreed to pay a semi-annual put premium of 1.275% and 1.580% per annum on the unexercised portion of the put option to the 2028 Trust and 2048 Trust, respectively, and to reimburse the trusts for expenses. The put option premiums are recorded in operating expenses in the consolidated statements of operations. The 4.111% Senior Notes and 4.682% Senior Notes will be fully, irrevocably and unconditionally guaranteed by PFS. In addition, our obligations under the put option agreement and the expense reimbursement agreement with the trusts are also guaranteed by PFS. The contingent funding agreements with the trusts provide us with a source of liquid assets, which could be used to meet future financial obligations or to provide additional capital.

The put options described above will be exercised automatically in full if we fail to make certain payments to the trusts, including any failure to pay the put option premium or expense reimbursements when due, if such failure is not cured within 30 days, and upon certain bankruptcy events involving us or PFS. We are also required to exercise the put option in full: (i) if we reasonably believe that our consolidated shareholders’ equity, calculated in accordance with U.S. GAAP but excluding AOCI and noncontrolling interest, has fallen below $4.0 billion, subject to adjustment in certain cases; (ii) upon the occurrence of an event of default under the 4.111% Senior Notes and 4.682% Senior Notes; and (iii) if certain events occur relating to each trust’s status as an "investment company" under the Investment Company Act of 1940. In addition, we are required to purchase from the trusts any principal and interest strips of U.S. Treasury securities that are due and not paid.

We have an unlimited right to unwind a prior voluntary exercise of the put options by repurchasing all of the 4.111% Senior Notes and 4.682% Senior Notes held by the trusts in exchange for a corresponding amount of principal and interest strips of U.S. Treasury securities. If the put options have been fully exercised, the 4.111% Senior Notes and 4.682% Senior Notes issued may be redeemed by us prior to their maturity at par or, if greater, at a make-whole redemption price, in each case plus accrued and unpaid interest to the date of redemption. The 2028 P-Caps are to be redeemed by the 2028 Trust on February 15, 2028, or upon any early redemption of the 4.111% Senior Notes. The 2048 P-Caps are to be redeemed by the 2048 Trust on February 15, 2048, or upon any early redemption of the 4.682% Senior Notes.