DEBT AND INTEREST

9 Months Ended

Sep. 30, 2021

DEBT AND INTEREST

DEBT AND INTEREST

6. DEBT AND INTEREST

Short-term Debt

The following table provides the components of the Company’s short-term debt obligations as of September 30, 2021 and December 31, 2020.

	September 30		December 31
(millions)	2021		2020
Short-term debt
Notes payable		$16.0		$15.5
Long-term debt, current maturities		2.7		1.8
Total		$18.7		$17.3

Lines of Credit

As of September 30, 2021, the Company has a $2.0 billion multi-year credit facility which expires in April 2026. The credit facility has been established with a diverse syndicate of banks and supports the Company’s U.S. and Euro commercial paper programs. There were no borrowings under the Company’s credit facility as of either September 30, 2021 or December 31, 2020.

Commercial Paper

The Company’s commercial paper program is used as a source of liquidity and consists of a $2.0 billion U.S. commercial paper program and a $2.0 billion Euro commercial paper program. The maximum aggregate amount of commercial paper that may be issued by the Company under its commercial paper programs may not exceed $2.0 billion.

The Company had no outstanding commercial paper under its U.S. or Euro programs as of either September 30, 2021 or December 31, 2020.

Notes Payable

The Company’s notes payable consists of uncommitted credit lines with major international banks and financial institutions, primarily to support global cash pooling structures. As of September 30, 2021 and December 31, 2020, the Company had $16.0 million and $15.5 million, respectively, outstanding under these credit lines.

Long-term Debt

The following table provides the components of the Company’s long-term debt obligations, including current maturities, as of September 30, 2021 and December 31, 2020.

	Maturity	September 30		December 31
(millions)	by Year	2021		2020
Long-term debt
Public and 144A notes (2021 principal amount)
Five year 2017 senior notes ($500 million)	2022		$-		$498.6
Seven year 2016 senior notes ($400 million)	2023		-		399.0
Seven year 2016 senior notes (€575 million)	2024		676.1		682.0
Ten year 2015 senior notes (€575 million)	2025		676.6		682.9
Ten year 2016 senior notes ($750 million)	2026		745.9		745.3
Ten year 2017 senior notes ($500 million)	2027		493.6		496.0
Ten year 2020 senior notes ($698 million)	2030		708.3		765.2
Ten year 2020 senior notes ($600 million)	2031		594.9		594.4
Thirty year 2011 senior notes ($389 million)	2041		384.2		452.2
Thirty year 2016 senior notes ($200 million)	2046		197.1		246.4
Thirty year 2017 senior notes ($484 million)	2047		424.0		611.9
Thirty year 2020 senior notes ($500 million)	2050		490.3		490.1
Thirty-four year 2021 144A notes ($685 million)	2055		534.9		-
Finance lease obligations and other			8.6		7.1
Total debt			5,934.5		6,671.1
Long-term debt, current maturities			(2.7)		(1.8)
Total long-term debt			$5,931.8		$6,669.3

Public and 144A Notes

In August 2021, the Company completed a private offering of a $300 million aggregate principal 34-year fixed rate note with a coupon rate of 2.75% (“New 34-year Notes”). Immediately following the offering, the Company completed a private offering to exchange a portion of the outstanding senior notes due 2030, 2041, 2046, 2047 (“Old Notes”), for $385 million of New 34-year Notes (collectively “144A Notes”). In connection with the exchange offering, $387 million of Old Notes were validly tendered and subsequently cancelled.

The New 34-year Notes bear a lower fixed coupon rate on an extended maturity date, compared with the Old Notes that were exchanged. There were no other significant changes to the terms between the Old Notes and the New 34-year Notes. The exchange was accounted for as a debt modification, and there were cash payments to the note holders of $118 million as a result of the exchange. Existing deferred financing costs associated with the Old Notes, as well as discounts associated with the New 34-year Notes aggregating $143 million, are being amortized over the term of the New 34-year Notes and recorded as interest expense.

In September 2021, the Company completed the retirement of the $500 million 2.375% Notes due 2022 and the $400 million 3.25% Notes due 2023 which was accounted for as a debt extinguishment. A make-whole premium of $25.0 million was expensed immediately and is reflected as a financing cash flow activity.

The Company’s public notes and 144A notes may be redeemed by the Company at its option at redemption prices that include accrued and unpaid interest and a make-whole premium. Upon the occurrence of a change of control accompanied by a downgrade of the public notes below investment grade rating, within a specified time period, the Company would be required to offer to repurchase the public notes and 144A notes at a price equal to 101% of the aggregate principal amount thereof, plus any accrued and unpaid interest to the date of repurchase. The public notes and 144A notes are senior unsecured and unsubordinated obligations of the Company and rank equally with all other senior and unsubordinated indebtedness of the Company.

The Company entered into a registration rights agreement in connection with the issuance of the 144A Notes. Subject to certain limitations set forth in the registration rights agreement, the Company has agreed to (i) file a registration statement (the “Exchange Offer Registration Statement”) with respect to registered offers to exchange the 144A Notes for exchange notes (the “Exchange Notes”), which will have terms identical in all material respects to the New 34-year Notes, as applicable, except that the Exchange Notes will not contain transfer restrictions and will not provide for any increase in the interest rate thereon in certain circumstances and (ii) use commercially reasonable efforts to cause the Exchange Offer Registration Statement to be declared effective within 270 days after the date of issuance of the 144A Notes. Until such time as the Exchange Offer Registration Statement is declared effective, the 144A Notes may only be transferred in accordance with Rule 144A or Regulation S of the Securities Act of 1933, as amended.

Covenants

The Company is in compliance with its debt covenants as of September 30, 2021.

Net Interest Expense

Interest expense and interest income recognized during the third quarter and first nine months of 2021 and 2020 were as follows:

	Third Quarter Ended				Nine Months Ended
	September 30				September 30
(millions)	2021		2020		2021		2020
Interest expense		$78.3		$139.0		$183.8		$253.4
Interest income		(1.9)		(4.2)		(10.1)		(11.6)
Interest expense, net		$76.4		$134.8		$173.7		$241.8

Interest expense generally includes the expense associated with the interest on the Company’s outstanding borrowings. Interest expense also includes the amortization of debt issuance costs and debt discounts, which are both recognized over the term of the related debt.

During the third quarter of 2021, the Company issued, exchanged and retired certain long-term debt, incurring debt refinancing charges of $32.3 million ($28.4 million after tax), which are included as a component of interest expense, net on the Consolidated Statement of Income.

During the third quarter of 2020, the Company retired certain long-term debt, and incurred debt refinancing charges of $83.1 million ($64.0 million after tax), which are included as a component of interest expense, net on the Consolidated Statement of Income.