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Debt

12 Months Ended

Dec. 31, 2016

Note 5 – Debt

The outstanding amounts of debt and capital leases for the years ended December 31 were as follows:

(In millions)	2016		2015
Short-term:
Commercial paper	$	-	$	100
Current maturities of long-term debt		250		-
Other, including capital leases		26		49
Total short-term debt	$	276	$	149
Long-term:
Uncollateralized debt:
$250 million, 5.375% Notes due 2017	$	-	$	249
$131 million, 6.35% Notes due 2018		131		131
$250 million, 4.375% Notes due 2020⁽¹⁾		252		254
$300 million, 5.125% Notes due 2020⁽¹⁾		301		303
$78 million, 6.37% Notes due 2021		78		78
$300 million, 4.5% Notes due 2021⁽¹⁾		302		304
$750 million, 4% Notes due 2022		744		743
$100 million, 7.65% Notes due 2023		100		100
$17 million, 8.3% Notes due 2023		17		17
$900 million, 3.25% Notes due 2025		893		892
$300 million, 7.875% Debentures due 2027		299		299
$83 million, 8.3% Step Down Notes due 2033		82		82
$500 million, 6.15% Notes due 2036		498		498
$300 million, 5.875% Notes due 2041		296		295
$750 million, 5.375% Notes due 2042		743		743
Other, including capital leases		20		32
Total long-term debt	$	4,756	$	5,020

(1) The Company has entered into interest rate swap contracts hedging a portion of these fixed-rate debt instruments. See Note 12 for further information about the Company’s interest rate risk management and these derivative instruments.

The Company has a five-year revolving credit and letter of credit agreement for $1.5 billion that permits up to $500 million to be used for letters of credit. This agreement extends through December 2019 and is diversified among 16 banks with three banks each having 12% of the commitment and the remainder spread among 13 banks. The credit agreement includes options to increase the commitment amount to $2 billion and to extend the term past December 2019, subject to consent by the administrative agent and the committing banks. The credit agreement is available for general corporate purposes including for the issuance of letters of credit. The credit agreement contains customary covenants and restrictions, including a financial covenant that the Company may not permit its leverage ratio – that is total consolidated debt to total consolidated capitalization (each as defined in the credit agreement) – to exceed 0.50. The leverage ratio excludes the following items that are included in accumulated other comprehensive loss on the Company's Consolidated Balance Sheets: net unrealized appreciation in fixed maturities and the portion of the post-retirement benefits liability adjustment attributable to pension. The Company was in compliance with its debt covenants as of December 31, 2016.

The Company had $9.7 billion of borrowing capacity within the maximum debt coverage covenant in the letter of credit agreement, in addition to the $5 billion of debt outstanding as of December 31, 2016. This additional borrowing capacity includes the $1.5 billion available under the credit agreement. Letters of credit outstanding as of December 31, 2016 totaled $14 million.

On March 11, 2015, the Company issued $900 million of 10-Year Notes due April 15, 2025 at a stated interest rate of 3.25% ($892 million, net of discount and issuance costs, with an effective annual interest rate of 3.36%). Interest is payable on April 15 and October 15 of each year beginning October 15, 2015. The proceeds of this debt were used to repay debt maturing in 2016 and in 2019 as described below.

The Company may redeem these Notes, at any time, in whole or in part, at a redemption price equal to the greater of:

100% of the principal amount of the Notes to be redeemed; or
the present value of the remaining principal and interest payments on the Notes being redeemed discounted at the applicable Treasury rate plus 17.5 basis points.

The following debt transactions occurred in April 2015:

The Company redeemed its 2.75% Notes due 2016, including accrued interest from November 15, 2014 through the settlement date of April 13, 2015. The redemption price equaled the present value of the remaining principal and interest payments on the Notes being redeemed, discounted at a rate equal to the 10-year Treasury Rate plus a fixed spread of 30 basis points. The Company paid $626 million including accrued interest and expenses, resulting in a pre-tax loss on early debt extinguishment of $21 million ($14 million after-tax) that was recognized in the second quarter of 2015.
The Company redeemed its 8.50% Notes due 2019, including accrued interest from November 1, 2014 through the settlement date of April 13, 2015. The redemption price equaled the present value of the remaining principal and interest payments on the Notes being redeemed, discounted at a rate equal to the 10-year Treasury Rate plus a fixed spread of 50 basis points. The Company paid $329 million including accrued interest and expenses, resulting in a pre-tax loss on early debt extinguishment of $79 million ($51 million after-tax) that was recognized in the second quarter of 2015.

Maturities of long-term debt and capital leases are as follows:

	Scheduled Maturities
(In millions)	Long-term Debt⁽¹⁾		Capital Leases
2017	$	255	$	21
2018	$	131	$	10
2019	$	-	$	10
2020	$	549	$	-
2021	$	378	$	-
Maturities after 2021	$	3,694	$	-

(1) Long-term debt maturity amounts exclude capital leases.

Interest expense on long-term and short-term debt was $251 million in 2016, $252 million in 2015, and $265 million in 2014. The 2015 expense excludes losses on the early extinguishment of debt.