Loans Payable, Long-Term Debt and Other Commitments

Loans payable at December 31, 2014 included $1.0 billion of notes due in 2015, $1.5 billion of commercial paper, $55 million of short-term foreign borrowings and $143 million of long-dated notes that are subject to repayment at the option of the holder. Loans payable at December 31, 2013 included $2.1 billion of notes due in 2014, $1.6 billion of commercial paper, $402 million of short-term foreign borrowings and $370 million of long-dated notes that are subject to repayment at the option of the holders. The weighted-average interest rate of the commercial paper borrowings was 0.15% and 0.09% at December 31, 2014 and 2013, respectively.

Long-term debt at December 31 consisted of:



	2014		2013
2.80% notes due 2023	$	1,749	$	1,749
5.00% notes due 2019	1,291		1,293
4.15% notes due 2043	1,246		1,246
1.125% euro-denominated notes due 2021	1,218		—
1.875% euro-denominated notes due 2026	1,210		—
3.875% notes due 2021	1,150		1,148
2.40% notes due 2022	1,000		1,000
Floating-rate borrowing due 2018	1,000		1,000
1.10% notes due 2018	999		998
0.70% notes due 2016	998		997
1.30% notes due 2018	984		975
2.25% notes due 2016	858		866
6.50% notes due 2033	812		1,306
2.50% euro-denominated notes due 2034	603		—
6.55% notes due 2037	597		1,143
Floating-rate borrowing due 2016	500		500
3.60% notes due 2042	493		492
5.85% notes due 2039	418		749
5.75% notes due 2036	371		498
5.95% debentures due 2028	356		498
6.40% debentures due 2028	326		499
6.30% debentures due 2026	152		249
6.00% notes due 2017	—		1,095
4.00% notes due 2015	—		1,029
4.75% notes due 2015	—		1,023
Other	368		186
	$	18,699	$	20,539

Other (as presented in the table above) included $309 million and $119 million at December 31, 2014 and 2013, respectively, of borrowings at variable rates averaging 0.0% for 2014 and 2013. Other also included foreign borrowings of $53 million and $64 million at December 31, 2014 and 2013, respectively, at varying rates up to 6.25% and 4.50%, respectively.

With the exception of the 6.30% debentures due 2026, the notes listed in the table above are redeemable in whole or in part, at Merck’s option at any time, at varying redemption prices.

In October 2014, the Company issued euro-denominated senior unsecured notes consisting of €1.0 billion principal amount of 1.125% notes due 2021, €1.0 billion principal amount of 1.875% notes due 2026 and €500 million principal amount of 2.5% notes due 2034. Interest on the notes is payable annually. The notes of each series are redeemable in whole or in part at any time at the Company’s option at varying redemption prices. The net proceeds of the offering of $3.1 billion were used in part to repay debt that was validly tendered in connection with tender offers launched by the Company for certain outstanding notes and debentures. The Company paid $2.5 billion in aggregate consideration (applicable purchase price together with accrued interest) to redeem $1.8 billion principal amount of debt. In addition, in November 2014, Merck redeemed its $1.0 billion 4.00% notes due 2015 and its $1.0 billion 6.00% notes due 2017. The Company recorded a pretax loss of $628 million in 2014 in connection with these transactions.

In February 2015, Merck issued $8.0 billion aggregate principal amount of senior unsecured notes consisting of $300 million principal amount of floating rate notes due 2017, $700 million principal amount of floating rate notes due 2020, $1.25 billion principal amount of 1.85% notes due 2020, $1.25 billion aggregate principal amount of 2.35% notes due 2022, $2.5 billion aggregate principal amount of 2.75% notes due 2025 and $2.0 billion aggregate principal amount of 3.70% notes due 2045. The Company used a substantial portion of the net proceeds of the offering to repay commercial paper issued to substantially finance the Company’s acquisition of Cubist. Any remaining net proceeds will be used for general corporate purposes, including without limitation repurchases of the Company’s common stock, and the repayment of outstanding commercial paper borrowings and upcoming debt maturities.

In December 2014, the Company entered into a bridge loan agreement with certain banks pursuant to which the Company had the ability to borrow up to $8.0 billion for the purpose of obtaining short-term financing for the acquisition of Cubist. The Company did not borrow any funds under the bridge loan and, after issuing $8.0 billion of senior unsecured notes as discussed above, terminated the bridge loan on February 20, 2015.

Effective as of November 3, 2009, the Company executed a full and unconditional guarantee of the then existing debt of its subsidiary Merck Sharp & Dohme Corp. (“MSD”) and MSD executed a full and unconditional guarantee of the then existing debt of the Company (excluding commercial paper), including for payments of principal and interest. These guarantees do not extend to debt issued subsequent to that date.

Certain of the Company’s borrowings require that Merck comply with financial covenants including a requirement that the Total Debt to Capitalization Ratio (as defined in the applicable agreements) not exceed 60%. At December 31, 2014, the Company was in compliance with these covenants.

The aggregate maturities of long-term debt for each of the next five years are as follows: 2015, $1.0 billion; 2016, $2.4 billion; 2017, $19 million; 2018, $3.0 billion; 2019, $1.3 billion. These amounts do not reflect debt maturities related to the Company’s February 2015 debt issuance described above.

In August 2014, the Company terminated its existing credit facility and entered into a new $6.0 billion, five-year credit facility that matures in August 2019. The facility provides backup liquidity for the Company’s commercial paper borrowing facility and is to be used for general corporate purposes. The Company has not drawn funding from this facility.

Rental expense under operating leases, net of sublease income, was $350 million in 2014, $367 million in 2013 and $396 million in 2012. The minimum aggregate rental commitments under noncancellable leases are as follows: 2015, $232 million; 2016, $122 million; 2017, $92 million; 2018, $55 million; 2019, $46 million and thereafter, $97 million. The Company has no significant capital leases.