Note 7. Debt and Credit Facilities

Our debt is summarized in the table below:

(In millions)	December 28, 2013			December 29, 2012
Manufacturing group
Long-term senior debt:
3.875% due 2013	$	—		$	318
4.50% convertible senior notes due 2013	—			210
6.20% due 2015	350			350
4.625% due 2016	250			250
Variable-rate note due 2016 (average rate of 1.54%)	150			—
5.60% due 2017	350			350
7.25% due 2019	250			250
6.625% due 2020	246			242
5.95% due 2021	250			250
Other (weighted-average rate of 1.57% and 1.52%, respectively)	85			81
	1,931			2,301
Less: Current portion of long-term debt	(8		)	(535		)
Total Long-term debt	1,923			1,766
Total Manufacturing group debt	$	1,931		$	2,301
Finance group
Fixed-rate notes due 2013 (weighted-average rate of 5.28%)	$	—		$	400
Variable-rate note due 2013 (weighted-average rate of 1.21%)	—			48
Fixed-rate note due 2014 (5.13%)	100			100
Fixed-rate notes due 2013-2017* (weighted-average rate of 4.59% and 4.88%, respectively)	42			102
Variable-rate notes due 2016 (weighted-average rate of 1.78%)	200			—
Fixed-rate notes due 2017-2023* (weighted-average rate of 2.67% and 2.70%, respectively)	378			382
Variable-rate notes due 2015-2020* (weighted-average rate of 1.19% and 1.09%, respectively)	63			64
Securitized debt (weighted-average rate of 1.50% and 1.55%, respectively)	172			282
6% Fixed-to-Floating Rate Junior Subordinated Notes	299			300
Fair value adjustments and unamortized discount	2			8
Total Finance group debt	$	1,256		$	1,686

* Notes amortize on a quarterly or semi-annual basis.

The following table shows required payments during the next five years on debt outstanding at December 28, 2013:

(In millions)	2014		2015		2016		2017		2018
Manufacturing group	$	8	$	357	$	408	$	358	$	7
Finance group	223		148		302		92		67
Total	$	230	$	505	$	710	$	450	$	74

During the fourth quarter of 2013, Textron entered into a senior unsecured revolving credit facility for an aggregate principal amount of $1.0 billion, of which up to $100 million is available for the issuance of letters of credit. This facility expires in October 2018. At December 28, 2013, there were no amounts borrowed against the facility, and there were $35 million of letters of credit issued against it.

On January 30, 2014, we issued $250 million in 3.65% notes due 2021 and $350 million in 4.30% notes due 2024 under our shelf registration statement. We plan to use the net proceeds of the issuance of these notes to finance a portion of the acquisition of all outstanding equity interests in Beech Holdings, LLC, the parent of Beechcraft Corporation, which we have agreed to purchase for approximately $1.4 billion in cash. The transaction is expected to close during the first half of 2014, subject to customary closing conditions, including regulatory approvals. If the transaction is not completed, or the related merger agreement is terminated, on or before December 31, 2014, we will be required to redeem all outstanding 2021 notes at a redemption price equal to 101% of the principal amount thereof, plus accrued and unpaid interest.

On January 24, 2014, in order to finance the Beechcraft acquisition, we also entered into a five-year term loan with a syndicate of banks in the principal amount of $500 million which we intend to draw down upon the closing of the transaction.

4.50% Convertible Senior Notes and Related Transactions

On May 5, 2009, we issued $600 million of convertible senior notes with a maturity date of May 1, 2013 and interest payable semiannually. The convertible notes were accounted for in accordance with generally accepted accounting principles, which required us to separately account for the liability (debt) and the equity (conversion option) components of the convertible notes in a manner that reflected our non-convertible debt borrowing rate at time of issuance. Accordingly, we recorded a debt discount and corresponding increase to additional paid-in capital of $134 million at the issuance date. We amortized the debt discount utilizing the effective interest method over the life of the notes, which increased the effective interest rate of the convertible notes from its coupon rate of 4.50% to 11.72%. We incurred cash and non-cash interest expenses of $9 million in 2013, $25 million in 2012 and $58 million in 2011 for these notes.

On May 1, 2013, our remaining convertible senior notes matured, and we paid the holders of the notes $215 million in settlement of the face value of the notes. In addition, we issued 8.9 million shares of our common stock to converting holders in settlement of the excess of the conversion value over the face value of the notes; however, after giving effect to the exercise of the related call options and warrants discussed below, the incremental share settlement in excess of the face value of the notes resulted in a 7.4 million net share issuance.

Concurrently with the pricing of the convertible notes in May 2009, we entered into transactions with two counterparties, pursuant to which we purchased from the counterparties call options to acquire our common stock and sold to the counterparties warrants to purchase our common stock. The call options settled on May 1, 2013, while the warrants settled daily over a 45-day period beginning on February 27, 2013. We acquired 8.9 million shares of our common stock upon the settlement of the call options and issued an aggregate of 7.4 million shares of our common stock in connection with the settlement of the warrants during the first half of 2013. The settlement of the call options and warrants resulted in a $41 million net increase in treasury stock during 2013.

On October 25, 2011, we entered into capped call transactions with the counterparties that covered an aggregate of 28.7 million shares of our common stock as of the end of 2012. The capped calls had a strike price of $13.125 per share and a cap price of $15.75 per share, which entitled us to receive the per share value of our stock price in excess of $13.125 up to a maximum stock price of $15.75 at the expiration date. Upon expiration of the capped calls, the market price of our common stock exceeded the maximum stock price, and we received $75 million in cash from the counterparties in the second quarter of 2013.

6% Fixed-to-Floating Rate Junior Subordinated Notes

The Finance group’s $299 million of 6% Fixed-to-Floating Rate Junior Subordinated Notes are unsecured and rank junior to all of its existing and future senior debt. The notes mature on February 15, 2067; however, we have the right to redeem the notes at par on or after February 15, 2017 and are obligated to redeem the notes beginning on February 15, 2042. The Finance group has agreed in a replacement capital covenant that it will not redeem the notes on or before February 15, 2047 unless it receives a capital contribution from the Manufacturing group and/or net proceeds from the sale of certain replacement capital securities at specified amounts. During 2013, the Manufacturing group made a capital contribution to TFC for the repurchase of $1 million of these notes. Interest on the notes is fixed at 6% until February 15, 2017 and floats at the three-month London Interbank Offered Rate + 1.735% thereafter.

Support Agreement

Under a Support Agreement, Textron Inc. is required to ensure that TFC maintains fixed charge coverage of no less than 125% and consolidated shareholder’s equity of no less than $200 million. Cash payments of $240 million and $182 million were made to TFC in 2012 and 2011, respectively, to maintain compliance with the fixed charge coverage ratio.