
	Long-Term Debt and Borrowing Arrangements

The Company’s indebtedness consisted of:



	June 30, 2014		December 31, 2013
Securitized vacation ownership debt: ^(a)
Term notes	$	1,600	$	1,648
Bank conduit facility	291		262
Total securitized vacation ownership debt	1,891		1,910
Less: Current portion of securitized vacation ownership debt	187		184
Long-term securitized vacation ownership debt	$	1,704	$	1,726
Long-term debt: ^(b)
Revolving credit facility (due July 2018)	$	16	$	23
Commercial paper	107		210
$315 million 6.00% senior unsecured notes (due December 2016) ^(c)	318		318
$300 million 2.95% senior unsecured notes (due March 2017)	299		298
$14 million 5.75% senior unsecured notes (due February 2018)	14		14
$450 million 2.50% senior unsecured notes (due March 2018)	448		447
$40 million 7.375% senior unsecured notes (due March 2020)	40		40
$250 million 5.625% senior unsecured notes (due March 2021)	246		246
$650 million 4.25% senior unsecured notes (due March 2022) ^(d)	646		643
$400 million 3.90% senior unsecured notes (due March 2023) ^(e)	403		387
Capital leases	186		191
Other	99		114
Total long-term debt	2,822		2,931
Less: Current portion of long-term debt	50		49
Long-term debt	$	2,772	$	2,882

^(a)

Represents non-recourse debt that is securitized through bankruptcy-remote special purpose entities ("SPEs"), the creditors of which have no recourse to the Company for principal and interest. These outstanding borrowings are collateralized by $2,287 million and $2,314 million of underlying gross vacation ownership contract receivables and related assets as of June 30, 2014 and December 31, 2013, respectively.


^(b)	The carrying amounts of the senior unsecured notes are net of unamortized discount of $16 million and $17 million as of June 30, 2014 and December 31, 2013, respectively.


^(c)	Includes $3 million of unamortized gains from the settlement of a derivative as of both June 30, 2014 and December 31, 2013.


^(d)	Includes a $2 million increase and $2 million decrease in the carrying value resulting from a fair value hedge derivative as of June 30, 2014 and December 31, 2013, respectively.


^(e)	Includes a $5 million increase and $10 million decrease in the carrying value resulting from a fair value hedge derivative as of June 30, 2014 and December 31, 2013, respectively.

Commercial Paper

The Company maintains U.S. and European commercial paper programs with a total capacity of $750 million and $500 million, respectively. As of June 30, 2014, the Company had outstanding borrowings of $107 million at a weighted average interest rate of 0.63%, all of which was under its U.S. commercial paper program. As of December 31, 2013, the Company had $210 million of outstanding borrowings at a weighted average interest rate of 0.74% under its commercial paper programs. The Company considers outstanding borrowings under its commercial paper programs to be a reduction of available capacity on its revolving credit facility.

Fair Value Hedges

The Company has fixed to variable interest rate swap agreements with notional amounts of $400 million of its 3.90% senior unsecured notes and $100 million of its 4.25% senior unsecured notes. The fixed interest rates on these notes were effectively modified to a variable LIBOR-based index. As of June 30, 2014, the variable interest rates were 2.39% and 2.30% for the 3.90% and 4.25% senior unsecured notes, respectively. The Company had a $7 million asset and a $12 million liability recorded as of June 30, 2014 and December 31, 2013, respectively, which represented the aggregate fair value of these interest rate swap agreements.

2014 Debt Issuances

Sierra Timeshare 2014-1 Receivables Funding, LLC. During March 2014, the Company closed a series of term notes payable, Sierra Timeshare 2014-1 Receivables Funding, LLC, in the initial principal amount of $425 million at an advance rate of 88%. These borrowings bear interest at a weighted average coupon rate of 2.15% and are secured by vacation ownership contract receivables. As of June 30, 2014, the Company had $366 million of outstanding borrowings under these term notes.

Early Extinguishment of Debt

During the first quarter of 2013, the Company repurchased a portion of its 5.75% and 7.375% senior unsecured notes totaling $446 million through tender offers, repurchased $42 million of its 6.00% senior unsecured notes on the open market and executed a redemption option for the remaining $43 million outstanding on its 9.875% senior unsecured notes. As a result, the Company repurchased a total of $531 million of its outstanding senior unsecured notes and incurred expenses of $111 million, of which $106 million was cash and $5 million was non-cash, during the six months ended June 30, 2013, which are included within early extinguishment of debt on the Consolidated Statement of Income.

Maturities and Capacity

The Company’s outstanding debt as of June 30, 2014 matures as follows:



	Securitized Vacation Ownership Debt		Long-Term Debt		Total
Within 1 year	$	187	$	50	$	237
Between 1 and 2 years	262		51		313
Between 2 and 3 years	354		662		1,016
Between 3 and 4 years	180		477		657
Between 4 and 5 years	178		138		316
Thereafter	730		1,444		2,174
	$	1,891	$	2,822	$	4,713

Debt maturities of the securitized vacation ownership debt are based on the contractual payment terms of the underlying vacation ownership contract receivables. As such, actual maturities may differ as a result of prepayments by the vacation ownership contract receivable obligors.

As of June 30, 2014, available capacity under the Company’s borrowing arrangements was as follows:



	Securitized Bank Conduit Facility^(a)		Revolving Credit Facility
Total Capacity	$	650	$	1,500
Less: Outstanding Borrowings	291		16
Letters of credit	—		9
Commercial paper borrowings	—		107		^(b)
Available Capacity	$	359	$	1,368


^(a)	The capacity of this facility is subject to the Company’s ability to provide additional assets to collateralize additional securitized borrowings.


^(b)	The Company considers outstanding borrowings under its commercial paper programs to be a reduction of the available capacity of its revolving credit facility.

Interest Expense

The Company incurred non-securitized interest expense of $29 million and $56 million during the three and six months ended June 30, 2014, respectively. Such amounts consist primarily of interest on long-term debt, partially offset by capitalized interest of $1 million and $2 million for the three and six months ended June 30, 2014, respectively, and are included within interest expense on the Consolidated Statements of Income. Cash paid related to interest on the Company's non-securitized debt was $56 million during the six months ended June 30, 2014.

The Company incurred non-securitized interest expense of $34 million and $66 million during the three and six months ended June 30, 2013, respectively. Such amounts consist primarily of interest on long-term debt, partially offset by capitalized interest of $1 million and $2 million for the three and six months ended June 30, 2013, respectively, and are included within interest expense on the Consolidated Statements of Income. Cash paid related to interest on the Company's non-securitized debt was $63 million during the six months ended June 30, 2013.

Interest expense incurred in connection with the Company's securitized vacation ownership debt during the three and six months ended June 30, 2014 was $17 million and $35 million, respectively, and $20 million and $40 million during the three and six months ended June 30, 2013, respectively, and is recorded within consumer financing interest on the Consolidated Statements of Income. Cash paid related to such interest was $26 million and $32 million during the six months ended June 30, 2014 and 2013, respectively.