Debt

9 Months Ended

Sep. 30, 2017

Note 5 ― Debt

The outstanding amounts of debt and capital leases were as follows:

	September 30,		December 31,
(In millions)	2017		2016
Short-term:
Current maturities of long-term debt	$	131	$	250
Other, including capital leases		10		26
Total short-term debt	$	141	$	276
Long-term:
$131 million, 6.35% Notes due 2018	$	-	$	131
$250 million, 4.375% Notes due 2020 ⁽¹⁾		252		252
$300 million, 5.125% Notes due 2020 ⁽¹⁾		301		301
$78 million, 6.37% Notes due 2021		78		78
$300 million, 4.5% Notes due 2021⁽¹⁾		301		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⁾		314		743
$1,000 million, 3.875% Notes due 2047		987		-
Other, including capital leases		12		20
Total long-term debt	$	5,207	$	4,756

The Company has entered into interest rate swap contracts hedging a portion of these fixed-rate debt instruments. See Note 11 for further information about the Company’s interest rate risk management and these derivative instruments.
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 to the redemption date 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.

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 12, 2019 and is diversified among 16 banks, with 3 banks each having 12% of the commitment and the remainder spread among 13 banks in varying amounts. The credit agreement includes options subject to consent by the administrative agent and the committing banks to increase the commitment amount to $2 billion and to extend the term past December 12, 2019. 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 – total consolidated debt to total consolidated capitalization (each as defined in the credit agreement) – to be greater than 0.50. The leverage ratio calculation excludes the following items that are included in accumulated other comprehensive loss on the Company’s consolidated balance sheets: net unrealized appreciation on fixed maturities and the portion of the post-retirement benefits liability adjustment attributable to pension.

In addition to the $5.3 billion of debt outstanding as of September 30, 2017, the Company had $9.8 billion of borrowing capacity within the maximum debt coverage covenant in the credit agreement. This additional borrowing capacity includes the $1.5 billion available under the credit agreement. Letters of credit outstanding as of September 30, 2017 totaled $11 million.

The Company was in compliance with its debt covenants as of September 30, 2017.