Long-Term Debt

9 Months Ended

Sep. 30, 2019

Long-Term Debt

Long-Term Debt

(7)   Long-Term Debt

Debt is summarized as follows:

	Outstanding
	principal at		Carrying value
	September 30, 2019		September 30, 2019		December 31, 2018
	amounts in millions
Corporate level debentures
8.5% Senior Debentures due 2029	$	287		285	286
8.25% Senior Debentures due 2030		504		502	502
4% Exchangeable Senior Debentures due 2029		432		342	304
3.75% Exchangeable Senior Debentures due 2030		433		322	307
3.5% Exchangeable Senior Debentures due 2031		302		536	377
0.75% Exchangeable Senior Debentures due 2043		—		2	2
1.75% Exchangeable Senior Debentures due 2046		332		425	344
Subsidiary level notes and facilities
QVC 3.125% Senior Secured Notes due 2019		—		—	399
QVC 5.125% Senior Secured Notes due 2022		500		500	500
QVC 4.375% Senior Secured Notes due 2023		750		750	750
QVC 4.85% Senior Secured Notes due 2024		600		600	600
QVC 4.45% Senior Secured Notes due 2025		600		599	599
QVC 5.45% Senior Secured Notes due 2034		400		399	399
QVC 5.95% Senior Secured Notes due 2043		300		300	300
QVC 6.375% Senior Secured Notes due 2067		225		225	225
QVC Bank Credit Facilities		1,777		1,777	1,320
Other subsidiary debt		—		—	188
Deferred loan costs		—		(24)	(29)
Total consolidated Qurate Retail debt	$	7,442		7,540	7,373
Less current classification				(1,202)	(1,410)
Total long-term debt			$	6,338	5,963

QVC Bank Credit Facilities

On December 31, 2018, QVC entered into the Fourth Amended and Restated Credit Agreement with Zulily as co-borrower (collectively, the “Borrowers”) which is a multi-currency facility that provides for a $3.65 billion revolving credit facility, with a $450 million sub-limit for standby letters of credit and up to $1.5 billion of uncommitted incremental revolving loan commitments or incremental term loans. The Fourth Amended and Restated Credit Agreement includes a $400 million tranche that may be borrowed by QVC or Zulily, with a $50 million sub-limit for standby letters of credit.  The remaining $3.25 billion and any incremental loans may be borrowed only by QVC.  Borrowings that are alternate base rate loans will bear interest at a per annum rate equal to the base rate plus a margin that varies between 0.25% to 0.75% depending on the Borrowers combined ratio of Consolidated Total Debt to Consolidated EBITDA for the most recent four fiscal quarter period (the “Combined Consolidated Leverage Ratio”). Borrowings that are LIBOR loans will bear interest at a per annum rate equal to the applicable LIBOR rate plus a margin that varies between 1.25% and 1.75% depending on the Borrowers’ Combined Consolidated Leverage Ratio. Each loan may be prepaid at any time and from time to time without penalty other than customary breakage costs. No mandatory prepayments will be required other than when borrowings and letter of credit usage exceed availability; provided that, if Zulily ceases to be controlled by Qurate Retail, all of its loans must be repaid and its letters of credit cash collateralized. The facility matures on December 31, 2023. Payment of loans may be accelerated following certain customary events of default.

The payment and performance of the Borrowers’ obligations (including Zulily’s obligations) under the Fourth Amended and Restated Credit Agreement are guaranteed by each of QVC’s Material Domestic Subsidiaries (as defined in

the Fourth Amended and Restated Credit Agreement). Further, the borrowings under the Fourth Amended and Restated Credit Agreement are secured, pari passu with QVC’s existing notes, by a pledge of all of QVC’s equity interests.  In addition, the payment and performance of the Borrowers’ obligations with respect to the $400 million tranche available to both QVC and Zulily are also guaranteed by Zulily and secured by a pledge of all of Zulily’s equity interests.

The Fourth Amended and Restated Credit Agreement contains certain affirmative and negative covenants, including certain restrictions on QVC and Zulily and each of their respective restricted subsidiaries (subject to certain exceptions) with respect to, among other things: incurring additional indebtedness; creating liens on property or assets; making certain loans or investments; selling or disposing of assets; paying certain dividends and other restricted payments; dissolving, consolidating or merging; entering into certain transactions with affiliates; entering into sale or leaseback transactions; restricting subsidiary distributions; and limiting QVC’s consolidated leverage ratio, and the Borrowers’ Combined Consolidated Leverage Ratio.

The interest rate on borrowings outstanding under the Fourth Amended and Restated Credit Agreement was 3.4% at September 30, 2019. Availability under the Fourth Amended and Restated Credit Agreement at September 30, 2019 was $1.9 billion, including the remaining portion of the $400 million tranche available to Zulily and outstanding letters of credit.  

Exchangeable Senior Debentures

The Company has elected to account for its exchangeable senior debentures using the fair value option. Accordingly, changes in the fair value of these instruments are recognized as unrealized gains (losses) in the statements of operations.  As of September 30, 2019 the balance of the 4% Exchangeable Senior Debentures due 2029, the 3.75% Exchangeable Senior Debentures due 2030, and the 3.5% Exchangeable Senior Debentures due 2031 have been classified as current because the Company does not own shares to redeem the debentures. The 0.75% Exchangeable Senior Debentures due 2043 are classified as current as of September 30, 2019 as they are currently redeemable. For the remaining exchangeables, the Company reviews the terms of the debentures on a quarterly basis to determine whether a triggering event has occurred to require current classification of the exchangeables upon a call event.

3.125% Senior Secured Notes due 2019

In April 2019, QVC repaid the outstanding balance on its 3.125% Senior Secured Notes due 2019.

Debt Covenants

Qurate Retail and its subsidiaries are in compliance with all debt covenants at September 30, 2019.

Other Subsidiary Debt

Other subsidiary debt at December 31, 2018 is comprised primarily of capitalized satellite transponder lease obligations.

Fair Value of Debt

Qurate Retail estimates the fair value of its debt based on the quoted market prices for the same or similar issues or on the current rate offered to Qurate Retail for debt of the same remaining maturities (Level 2). The QVC 6.375% Senior Secured Notes due 2067 (“2067 Notes”) are traded on the New York Stock Exchange, and the Company considers them to be actively traded. As such, the 2067 Notes are valued based on their trading price (Level 1). The fair value of Qurate Retail's publicly traded debt securities that are not reported at fair value in the accompanying condensed consolidated balance sheet at September 30, 2019 are as follows (amounts in millions):

Senior debentures	$	838
QVC senior secured notes	$	3,505

Due to the variable rate nature, Qurate Retail believes that the carrying amount of its other debt, not discussed above, approximated fair value at September 30, 2019.