Borrowings and Lines of Credit

6 Months Ended

Jun. 30, 2023

Debt Disclosure [Abstract]

Borrowings and Lines of Credit

Borrowings and Lines of Credit

(dollars in millions)	June 30, 2023		December 31, 2022
Commercial paper	$	156	$	94
Other borrowings	44		45
Total short-term borrowings	$	200	$	139

Commercial Paper. As of June 30, 2023, there were $156 million in borrowings outstanding under the Company's $1.5 billion commercial paper programs, including €30 million of Euro denominated commercial paper. We use our commercial paper borrowings for general corporate purposes including to finance acquisitions, pay dividends, repurchase shares and for debt refinancing. The need for commercial paper borrowings may arise if the use of domestic cash for general corporate purposes exceeds the sum of domestic cash generation and foreign cash repatriated to the U.S.

For details regarding the Company's short-term borrowing activity in 2022, refer to Note 10 of the Company's audited consolidated financial statements and notes thereto included in our 2022 Form 10-K.

Long-term debt. On March 10, 2023, the Company entered into a new credit agreement ("Credit Agreement") with various banks providing for a $1.5 billion unsecured, unsubordinated 5-year revolving credit facility, with an interest rate on US Dollar denominated borrowings at Otis' option of the Term Secured Overnight Financing Rate ("SOFR") plus 0.10% or a base rate, and an interest rate on Euro denominated borrowings at Otis' option of the EURIBO rate or a daily simple Euro Short Term Rate ("ESTR"), plus, in each case, an applicable margin. The applicable margin initially is 1.25% for Term SOFR rate, EURIBO rate and daily simple ESTR rate borrowings, and 0.25% for base rate borrowings, and can fluctuate determined by reference to Otis' public debt ratings, as specified in the Credit Agreement. As of June 30, 2023, there were no borrowings under the Credit Agreement. The undrawn portion of the Credit Agreement serves as a backstop for the issuance of commercial paper. On March 10, 2023, we also terminated all commitments outstanding under the previous existing credit agreement, which was scheduled to expire on April 3, 2025.

As of June 30, 2023, the Company is in compliance with all covenants in the revolving credit agreement and the indentures governing all outstanding long-term debt. Long-term debt consisted of the following:

(dollars in millions)	June 30, 2023		December 31, 2022
0.000% notes due 2023 (€500 million principal value)	$	546	$	531
2.056% notes due 2025	1,300		1,300
0.37% notes due 2026 (¥21.5 billion principal value)	150		163
0.318% notes due 2026 (€600 million principal value)	655		638
2.293% notes due 2027	500		500
2.565% notes due 2030	1,500		1,500
0.934% notes due 2031 (€500 million principal value)	546		531
3.112% notes due 2040	750		750
3.362% notes due 2050	750		750
Other (including finance leases)	4		8
Total principal long-term debt	6,701		6,671
Other (discounts and debt issuance costs)	(38)		(42)
Total long-term debt	6,663		6,629
Less: current portion	546		531
Long-term debt, net of current portion	$	6,117	$	6,098

We may redeem the notes at our option pursuant to certain terms. For additional details regarding the Company's debt activity in 2022, refer to Note 10 of the Company's audited consolidated financial statements and notes thereto included in our 2022 Form 10-K.

Debt discounts and debt issuance costs are presented as a reduction of debt on the Condensed Consolidated Balance Sheets and are amortized as a component of interest expense over the term of the related debt using the effective interest method. The Condensed Consolidated Statements of Operations for the quarters and six months ended June 30, 2023 and 2022 reflects the following:

	Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	2023		2022		2023		2022
Debt issuance costs amortization	$	2	$	2	$	4	$	5
Total interest expense on external debt	34		35		67		71

The unamortized debt issuance costs as of June 30, 2023 and December 31, 2022 were $38 million and $42 million, respectively.

The weighted average maturity of our long-term debt as of June 30, 2023 is approximately 8.1 years. The weighted average interest expense rate on our borrowings outstanding as of June 30, 2023 and December 31, 2022 was as follows:

	June 30, 2023	December 31, 2022
Short-term borrowings	5.0%	4.7%
Total long-term debt	2.0%	2.0%

The weighted average interest expense rate on our borrowings during the quarters and six months ended June 30, 2023 and 2022 was as follows:

	Quarter Ended June 30,		Six Months Ended June 30,
	2023	2022	2023	2022
Short-term borrowings	4.9%	1.1%	4.9%	0.7%
Total long-term debt	2.0%	2.0%	2.0%	2.0%