Debt

6 Months Ended

Jul. 01, 2022

Note 6–Debt

Our debt consisted of the following:


	Stated interest rate	Effective interest rate	July 1, 2022(1)		December 31, 2021(1)
			(in millions)
Short-term debt:
Commercial paper	2.40%-2.55%	Various	$	150	$	—
Senior unsecured term loans:
$380 million term loan, due May 2022	1.54%	1.64%	—		380
$380 million term loan, due May 2023	2.63%	2.72%	380		—
Total short-term debt			$	530	$	380

Long-term debt:
Senior unsecured term loans:
$1,925 million term loan, due January 2025	3.05%	3.34%	$	1,252	$	1,298
Senior unsecured notes:
$500 million notes, due May 2023	2.95%	3.17%	499		498
$500 million notes, due May 2025	3.63%	3.76%	497		497
$750 million notes due May 2030	4.38%	4.50%	739		738
$1,000 million notes, due February 2031	2.30%	2.38%	991		990
$250 million notes, due July 2032	7.13%	7.43%	247		247
$300 million notes, due July 2033	5.50%	5.88%	158		158
$300 million notes, due December 2040	5.95%	6.03%	216		216
Notes payable and finance leases due on various dates through fiscal 2032	1.84%-4.18%	Various	47		54
Total long-term debt			4,646		4,696
Less current portion			(623)		(103)
Total long-term debt, net of current portion			$	4,023	$	4,593

(1) The carrying amounts of the senior unsecured term loans and notes as of July 1, 2022, and December 31, 2021, include the remaining principal outstanding of $5,018 million and $5,065 million, respectively, less total unamortized debt discounts and deferred debt issuances costs of $39 million and $43 million, respectively.

Term Loans and Revolving Credit Facility

We have a Credit Agreement (the "Credit Agreement") with certain financial institutions, which provided for a senior unsecured term loan facility in an aggregate principal amount of $1.9 billion (the "Term Loan Facility") and a $750 million senior unsecured revolving facility (the "Revolving Facility" and, together with the Term Loan Facility, the "Credit Facilities"). The Credit Facilities will mature in January 2025. The Revolving Facility permits two additional one-year extensions subject to lender consent. As of July 1, 2022, there were no borrowings outstanding under the Revolving Facility.

Borrowings under the Credit Agreement bear interest at a rate determined, at our option, based on either an alternate base rate or a LIBOR rate plus, in each case, an applicable margin that varies depending on our credit rating. The applicable margin range for LIBOR-denominated borrowings is from 1.13% to 1.75%. Based on our current ratings, the applicable margin for LIBOR-denominated borrowings is 1.38%.

The financial covenants in the Credit Agreement require that we maintain, as of the last day of each fiscal quarter, a ratio of adjusted consolidated total debt to consolidated EBITDA of not more than 3.75 to 1.00, subject to two increases to 4.50 to 1.00 following a material acquisition, and a ratio of EBITDA to consolidated interest expense of not less than 3.50 to 1.00.

On May 6, 2022, we entered into a 364-day term loan credit agreement ("Term Loan Agreement") with certain financial institutions, which provided for a senior unsecured term loan facility in an aggregate principal amount of $380 million. The proceeds of the Term Loan Agreement were used to repay the $380 million senior unsecured term loan entered into on May 7, 2021.

Borrowings under the Term Loan Agreement bear interest at a rate based on the Secured Overnight Financing Rate plus 1.10%, or an alternate base rate at our option.

The financial covenants in the Term Loan Agreement require that we maintain, as of the last day of each fiscal quarter, a ratio of adjusted consolidated total debt to consolidated EBITDA of not more than 3.75 to 1.00, subject to increases to 4.50 to 1.00 following a material acquisition, and a ratio of EBITDA to consolidated interest expense of not less than 3.50 to 1.00.

Commercial Paper

We have a commercial paper program in which the Company may issue short-term unsecured commercial paper notes ("Commercial Paper Notes") not to exceed $750 million. The proceeds will be used for general corporate purposes, including working capital, capital expenditures, acquisitions and share repurchases.

The Commercial Paper Notes are issued in minimum denominations of $0.25 million and have maturities of up to 397 days from the date of issuance. The Commercial Paper Notes either bear a stated or floating interest rate, if interest bearing, or will be sold at a discount from the face amount. As of July 1, 2022, we had $150 million of Commercial Paper Notes outstanding.

Principal Payments and Debt Issuance Costs

We made principal payments on our long-term debt of $407 million and $434 million during the three and six months ended July 1, 2022, respectively, and $27 million and $53 million during the three and six months ended July 2, 2021, respectively. This activity included required principal payments on our term loans of $404 million and $428 million for the three and six months ended July 1, 2022, and $24 million and $48 million for the three and six months ended July 2, 2021, respectively. As of July 1, 2022, and December 31, 2021, there were no borrowings outstanding under the Revolving Facility.

Amortization of debt discount and debt issuance costs was $2 million and $5 million for the three and six months ended July 1, 2022, respectively, and $2 million and $4 million for the three and six months ended July 2, 2021, respectively.

The Credit Facilities, the Term Loan Agreement, Commercial Paper Notes, senior unsecured term loans and notes are fully and unconditionally guaranteed and contain certain customary restrictive covenants, including among other things, restrictions on our ability to create liens and enter into sale and leaseback transactions under certain circumstances. We were in compliance with all covenants as of July 1, 2022.