BORROWINGS

12 Months Ended

Mar. 31, 2024

BORROWINGS

BORROWINGS

NOTE 11. BORROWINGS

Debt

The following table presents the components of our debt:

			At March 31,
(Dollars in millions)	Interest Rate	Maturity	2024		2023
Unsecured floating-rate term loan	—	—	$	—	$	500
Commercial loan agreement	3.00%	July 2026		68		96
Unsecured senior notes due 2026	2.05%	October 2026		700		700
Unsecured senior notes due 2028	2.70%	October 2028		500		500
Unsecured senior notes due 2031	3.15%	October 2031		650		650
Unsecured senior notes due 2034	6.35% *	February 2034		500		—
Unsecured senior notes due 2041	4.10%	October 2041		550		550
Finance lease and other obligations	5.57% **	2024-2029		291		242
			$	3,259	$	3,238
Less: Unamortized discount				5		5
Less: Unamortized debt issuance costs				16		13
Less: Current portion of long-term debt				126		110
Total long-term debt			$	3,112	$	3,111

*      Including the cross-currency swaps that the Company entered into subsequent to the issuance of the unsecured senior notes due 2034, the effective interest rate on such notes was approximately 3.84% for the quarter ended March 31,2024. For more information, see Note 7 – Financial Assets and Liabilities.

**    Weighted-average discount rate

Contractual obligations of long-term debt outstanding at March 31, 2024, exclusive of finance lease obligations, were as follows:

(Dollars in millions)*	Principal
Year ending March 31:
2025	$	29
2026		29
2027		710
2028		—
2029		500
Thereafter		1,700
Total	$	2,968

*    Contractual obligations approximate scheduled repayments.

Senior Unsecured Notes

In October 2021, in preparation for our Spin-off, we completed the offering of $2.4 billion in aggregate principal amount of senior unsecured fixed-rate notes as follows: $700 million aggregate principal amount of 2.05% Senior Notes due 2026, $500 million aggregate principal amount of 2.70% Senior Notes due 2028, $650 million aggregate principal amount of 3.15% Senior Notes due 2031 and $550 million aggregate principal amount of 4.10% Senior Notes due 2041 (the “Initial Notes”). The Initial Notes were offered and sold to qualified institutional buyers in reliance on Rule 144A under the Securities Act and to non-U.S. persons in reliance on Regulation S of the Securities Act. In connection with the issuance of the Initial Notes, we entered into a registration rights agreement with the purchasers of the Initial Notes, pursuant to which we completed a registered offering to exchange each series of Initial Notes for new notes with substantially identical terms during the quarter ended September 30, 2022.

In February 2024, we completed a registered offering of $500 million in aggregate principal amount of 6.35% senior unsecured notes due 2034 (the “2034 Notes”). We received proceeds of $494 million, net of debt issuance costs and discounts, which were capitalized as a reduction to the carrying value of debt and are being amortized as interest expense over the term of the notes. The 2034 Notes are the Company’s senior unsecured obligations and rank equally in right of payment with all of the Company’s other existing and future senior unsecured indebtedness. If measured at fair value in the consolidated financial statements, all of the Company’s senior unsecured notes would be classified as Level 1 in the fair value hierarchy.

The Initial Notes and the 2034 Notes are subject to customary affirmative covenants, negative covenants and events of default for financings of this type and are redeemable at our option in a customary manner.

Term Loan and Revolving Credit Facility

In October 2021, we entered into a $500 million three-year variable rate term loan credit agreement (the “Term Loan Credit Agreement”), which was scheduled to mature in November 2024. In November 2021, we drew down the full $500 million available under the Term Loan Credit Agreement. The interest rate on this term loan was equal to one-month U.S. Dollar London Interbank Offered Rate (“LIBOR”) plus a margin of 1.125%. In June 2023, we amended the Term Loan Credit Agreement by replacing LIBOR with the Secured Overnight Financing Rate (“SOFR”). The first repricing date using SOFR was in July 2023. In February 2024, the Company used the net proceeds from the offering of the 2034 Notes, together with cash on hand, to prepay the full amount outstanding under the Term Loan Credit Agreement, at no penalty.

In October 2021, we entered into a $3.15 billion multi-currency revolving credit agreement (the “Revolving Credit Agreement”), which expires, unless extended, in October 2026. The Revolving Credit Agreement was amended in June 2023, replacing LIBOR with SOFR. Interest rates on borrowings under the Revolving Credit Agreement will be based on prevailing market interest rates, plus a margin, as further described in the Revolving Credit Agreement.

The total facility fees recorded by the Company for the Revolving Credit Agreement were $5 million for the years ended March 31, 2024 and 2023. Facility fees were immaterial for the three months ended March 31, 2022 and the year ended December 31, 2021. As of March 31, 2024, there has been no drawdown on the Revolving Credit Agreement.

The Revolving Credit Agreement includes certain customary mandatory prepayment provisions. In addition, it includes customary events of default and affirmative and negative covenants as well as a maintenance covenant that will require that the ratio of our indebtedness for borrowed money to consolidated EBITDA (as defined in the Revolving Credit Agreement) for any period of four consecutive fiscal quarters be no greater than 3.50 to 1.00. The Company is in compliance with its debt covenants.

Loan Agreement

In the second quarter of 2021, our former Parent entered into a $140 million loan agreement with a bank to finance a purchase of software licenses on behalf of Kyndryl. The loan was transferred to Kyndryl in conjunction with the Separation and is included in the Company’s consolidated financial statements. The carrying amount of the loan approximates fair value. If measured at fair value in the consolidated financial statements, the loan would be classified as Level 2 in the fair value hierarchy.

The amortizing loan contains covenants, primarily for compliance with the scheduled payments in the loan agreement. Failure to comply with the loan covenants could constitute an event of default and result in the immediate repayment of the principal and interest on the loan. The Company is in compliance with all of the loan covenants and is expected to maintain a credit rating at or above the level outlined in the loan agreement.