Debt

12 Months Ended

Dec. 31, 2017

Note 5 – Debt

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

(In millions)	2017		2016
Short-term debt
Commercial paper	$	100	$	-
Current maturities of long-term debt		131		250
Other, including capital leases		9		26
Total short-term debt	$	240	$	276
Long-term uncollateralized debt
$131 million, 6.35% Notes due 2018	$	-	$	131
$250 million, 4.375% Notes due 2020⁽¹⁾		249		252
$300 million, 5.125% Notes due 2020⁽¹⁾		299		301
$78 million, 6.37% Notes due 2021		78		78
$300 million, 4.5% Notes due 2021⁽¹⁾		299		302
$750 million, 4% Notes due 2022		745		744
$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		894		893
$600 million, 3.05% Notes due 2027		594		-
$259 million, 7.875% Debentures due 2027 ⁽²⁾		258		299
$45 million, 8.3% Step Down Notes due 2033⁽²⁾		45		82
$191 million, 6.15% Notes due 2036 ⁽²⁾		190		498
$121 million, 5.875% Notes due 2041⁽²⁾		119		296
$317 million, 5.375% Notes due 2042⁽²⁾		315		743
$1,000 million, 3.875% Notes due 2047		988		-
Other, including capital leases		9		20
Total long-term debt	$	5,199	$	4,756

(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.
(2) The Company redeemed a portion of these debt issues through a cash tender offer in September 2017, the aggregate amount of which was $1.0 billion.

In the third quarter of 2017, the Company entered into two significant debt transactions: the issuance of new debt and a cash tender offer to retire a portion of outstanding debt. These transactions are described in more detail below.

On September 14, 2017, the Company issued new long-term debt as follows:

(In millions)
Debt Instrument	Principal		Term	Maturity	Stated Interest Rate		Effective Interest Rate		Amount net of discount and fees		Interest payment dates
10-Year Notes	$	600	10-Year	October 15, 2027	3.05	%	3.183	%	$	594	April 15 and October 15
30-Year Notes	$	1,000	30-Year	October 15, 2047	3.875	%	3.951	%	$	987	April 15 and October 15

The proceeds of this debt were mainly used to pay the consideration for the cash tender offer as described below. The Company intends to use the remaining proceeds for general corporate purposes, including the maturity of its Notes due in 2018.

At any time prior to July 15, 2027 (three months prior to the maturity date of the 10-Year Notes) or April 15, 2047 (six months prior to the maturity date of the 30-Year Notes), the Company may redeem the 10-Year Notes or the 30-Year Notes, in whole or in part, with accrued and unpaid interest, at a redemption price equal to the greater of:

100% of the principal amount of the applicable Notes; or
the sum of the present values of the remaining scheduled payments of principal and interest (excluding interest accrued at the redemption date) from the redemption date to the maturity date discounted at the applicable Treasury Rate plus 15 basis points for the 10-Year Notes and 20 basis points for the 30-Year Notes.

In the third quarter of 2017, the Company completed a cash tender offer to purchase $1.0 billion of aggregate principal amount of certain of its outstanding debt securities. The Company recorded a pre-tax loss of $321 million ($209 million after-tax), consisting primarily of premium payments on the tender.

During the first quarter of 2017, the Company repaid $250 million of long-term notes that had matured.

In April 2015, the Company redeemed two of its outstanding notes early. The Company paid $955 million, including accrued interest and expenses that resulted in a pre-tax loss on early debt extinguishment of $100 million ($65 million after-tax).

In December 2017, the Company entered into an updated revolving credit and letter of credit agreement. This agreement extends through December 2022 and is diversified among 15 banks. Under this agreement, the Company can borrow up to $1.5 billion for general corporate purposes, of which up to $500 million can be used for letters of credit. The credit agreement includes options to increase the commitment amount to $2 billion and to extend the term past December 2022, subject to consent by the lenders. The agreement contains customary covenants and restrictions, including a financial covenant that the Company may not permit its leverage ratio – total consolidated debt to total consolidated capitalization (each as defined in the credit agreement) – to be greater than 50%. The Company was in compliance with its debt covenants as of December 31, 2017.

As of December 31, 2017, the Company had $9.3 billion of borrowing capacity within the maximum debt leverage covenant in the credit agreement, in addition to $5.4 billion of debt outstanding. The Company had $11 million of letters of credit outstanding as of December 31, 2017.

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

	Scheduled Maturities
(In millions)	Long-term Debt⁽¹⁾		Capital Leases
2018	$	131	$	9
2019	$	-	$	8
2020	$	550	$	1
2021	$	378	$	-
2022	$	750	$	-
Maturities after 2022	$	3,550	$	-

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

Interest expense on long-term and short-term debt was $243 million in 2017, $251 million in 2016, and $252 million in 2015. These amounts exclude losses on the early extinguishment of debt.