Debt

The following is a summary of the Company's debt as of March 28, 2014 and March 29, 2013:



(Amounts in millions)	March 28, 2014		March 29, 2013
4.45% term notes, due September 2022	$	434	$	349
6.50% term notes, due March 2018	917		998
2.50% term notes, due September 2015	350		350
Term loan, due December 2014	413		—
Term loan, due September 2016	—		250
Mandatorily redeemable preferred stock outstanding	61		59
Note payable of consolidated subsidiary	68		62
Capitalized lease liabilities	511		561
Borrowings for assets acquired under long-term financing	98		98
Other borrowings	36		5
Total debt	2,888		2,732
Less: short term debt and current maturities of long term debt	681		234
Total long-term debt	$	2,207	$	2,498

Term note exchanges

During fiscal 2014, the Company entered into multiple term-note exchange agreements to exchange an aggregate of $82 million of its 6.50% term notes, due 2018, for an aggregate of $97 million original principal amount of its 4.45% term notes, due 2022. All the term note exchanges were accounted for as debt modifications and as a result, the difference between the original face value of term notes exchanged was accounted for as additional debt discount, which along with the existing unamortized discount and deferred financing costs, will be amortized to interest expense over the term of the 4.45% term notes, using the effective interest method.

Interest rate swaps

As disclosed in Note 10, during the second quarter of fiscal 2014, the Company entered into multiple interest rate swap transactions to hedge the fair value of $275 million of its 4.45% term notes, due 2022, which effectively converted the debt into floating interest rate debt. Under the terms of the swap transactions, the Company will receive semi-annual interest payments at the coupon rate of 4.45% and will pay variable interest based upon the LIBOR rate, plus a weighted average contractual margin. The Company designated these interest rate swaps as fair value hedges and is accounting for them in accordance with the short-cut method under ASC Topic 815 (See Note 10). The change in the fair value of the interest rate swaps from inception to March 28, 2014 was $3 million. The carrying value of the 4.45% term notes due 2022, was increased by this amount.

Term loans

During the third quarter of fiscal 2014, the Company's subsidiary, Computer Sciences Holdings (UK) Ltd., entered into a £250 million or $413 million (at the March 29, 2014 exchange rates; $408 million on the Consolidated Statement of Cash Flow due to the impact of movement in foreign currency exchange rates) short-term note payable, due December 2014, with a financial institution. The note bears interest at a variable rate based on LIBOR plus a margin of 17 basis points (bps) and is payable quarterly. The note is guaranteed by the Company, and financial covenants associated with the note are the same as those associated with the Company's $2.5 billion revolving credit facility, as described below.

During the third quarter of fiscal 2014, the Company repaid its $250 million term loan, due September 2016, from its cash balances on hand. The Company recorded $1 million as additional interest expense to write-off previously deferred debt issuances expenses associated with this term loan.

Note payable of a consolidated subsidiary

During fiscal 2013, the Company had entered into a credit agreement with a bank to sell the Company's interest in a five-year note receivable, due 2018, issued by one of its wholly-owned subsidiary, for a cash consideration of £41 million ($62 million as of March 29, 2013). During the fourth quarter of fiscal 2014, the Company's wholly-owned subsidiary amended its credit agreement with the bank to convert the principal amount of its note payable from British pounds to U.S. dollars and to be indexed to lower cost U.S. LIBOR rates. The outstanding principal amount of £41 million was thereby converted to $68 million based upon the conversion rate at the time. The original draw in British pounds was to hedge other British Pounds denominated instruments which have since been unwound. There were no other changes to the credit agreement.

Revolving credit facility

During the third quarter of fiscal 2014, the Company amended its unsecured $1.5 billion revolving credit facility by expanding its borrowing capacity to $2.5 billion and extending its maturity to January 15, 2019. The terms of the amended $2.5 billion facility allow for borrowings by both CSC and certain of its international subsidiaries within a $2.0 billion sub-limit for borrowings denominated in U.S. dollar, euros and pound sterling, and a $0.5 billion sub-limit for borrowings denominated in U.S. dollar, euros, Pounds sterling, Japanese yen, Australian dollar and Singapore dollar. The amended credit facility also provides, on an uncommitted basis, that the aggregate amount of the facility may be increased to up to $3 billion. The amended facility has a lower interest margin on drawn amounts and provides for lower commitment fees on undrawn amounts than the prior credit facility. The Company incurred costs of $4 million related to amendment and expansion of the credit facility. These costs have been deferred and will be amortized over the term of the facility. There were no borrowings outstanding against the $2.5 billion and $1.5 billion credit facilities, as of March 28, 2014 and March 29, 2013, respectively.

The financial covenants associated with both the £250 million short-term term loan and the $2.5 billion credit facility require the Company to: (1) maintain a minimum interest coverage ratio of consolidated Earnings Before Interest, Taxes, Depreciation and Amortization adjusted for other non-cash charges as defined by the credit agreement (EBITDA), to consolidated interest expense for the period of four consecutive fiscal quarters ending on or immediately prior to such period not to be less than 3.00 to 1.00; and (2) not permit at the end of any quarterly financial reporting period the ratio of consolidated total debt to consolidated EBITDA for the period of four consecutive fiscal quarters ending on or immediately prior to such date, to exceed 3.00 to 1.00. The Company was in compliance with all financial covenants as of March 28, 2014 and March 29, 2013.

Commercial paper

The Company typically issues commercial paper with average maturities of one to three months. The commercial paper is secured by the revolving credit facility discussed above. As of both March 28, 2014 and March 29, 2013, the Company had no borrowings outstanding against commercial paper. Subsequent to end of fiscal 2014, the Company suspended its commercial paper program.

Capital lease liabilities

Capitalized lease liabilities represent obligations due under capital leases for the use of computers and other equipment. The gross amount of assets recorded under capital leases was $1,208 million with accumulated amortization of $609 million, as of March 28, 2014, and $1,095 million with accumulated amortization of $465 million, as of March 29, 2013.

Borrowings for assets acquired under long-term financing

Certain asset purchases under outsourcing contracts were financed by borrowings from customers. These borrowings carry a rate of interest from 0.0% to 9.5% and will mature over the next five years. Gross amounts of assets purchased under long-term financings included $88 million and $69 million in property and equipment, $76 million and $54 million in software, $93 million and $90 million in outsourcing contract costs and $10 million and $10 million in other intangible assets as of March 28, 2014 and March 29, 2013, respectively.

Other borrowings

Foreign subsidiaries of the Company had $31 million borrowings outstanding as of March 28, 2014, and $0 million of borrowings outstanding as of March 29, 2013, under uncommitted lines of credit with certain foreign banks. CSC has provided parent guarantees for these short-term lines of credit which carry no commitment fees or significant covenants. In addition, the Company had $5 million of other borrowings outstanding as of March 28, 2014 and March 29, 2013, respectively, consisting of other interest bearing debt and notes payable.

Expected maturities of long-term debt, including borrowings for asset financing but excluding future minimum capital lease payments, for years subsequent to March 28, 2014, are as follows:



Fiscal Year	Amount (in millions)
2015	$	503
2016	366
2017	16
2018	988
2019	1
Thereafter	503
Total	$	2,377

The future minimum lease payments required to be made under the capital leases as of March 28, 2014, are as follows:



Fiscal Year	Amount (in millions)
2015	$	227
2016	167
2017	99
2018	49
2019	34
Thereafter	114
Total minimum lease payments	690
Less: Amount representing interest and executory costs	(179		)
Present value of net minimum lease payments	511
Less: Current maturities of capital lease obligations	(178		)
Long-term capitalized lease liabilities	$	333