Financing Arrangement

1 Months Ended

Feb. 29, 2016

(12) FINANCING ARRANGEMENTS

Senior Notes

In February 2021, we issued $750 million aggregate principal amount of 1.85% Senior Notes due February 15, 2031 (the “2031 Notes”) and $750 million aggregate principal amount of 2.95% Senior Notes due February 15, 2051 (the “2051 Notes”). Our proceeds were $1,478 million, net of discount of $6 million and issuance costs of $16 million. Both the discount and issuance costs are being amortized to interest expense over the respective terms of the 2031 Notes and the 2051 Notes using the effective interest rate method. The effective interest rate is 1.98% for the 2031 Notes and 3.04% for the 2051 Notes. Interest is payable semiannually in arrears, on February 15 and August 15 of each year.

In February 2016, we issued $600 million aggregate principal amount of 3.70% Senior Notes due March 1, 2021 (the “2021 Notes”) and $400 million aggregate principal amount of 4.80% Senior Notes due March 1, 2026 (the “2026 Notes”). Our proceeds were $989 million, net of discount of $2 million and issuance costs of $9 million. Both the discount and issuance costs are being amortized to interest expense over the respective terms of the 2021 Notes and the 2026 Notes using the effective interest rate method. The effective interest rate was 3.94% for the 2021 Notes and is 4.97% for the 2026 Notes. Interest is payable semiannually in arrears, on March 1 and September 1 of each year. We redeemed $600 million aggregate principal amount of the 2021 Notes on February 1, 2021 plus accrued and unpaid interest of $9 million.

The carrying and fair values of the Senior Notes are as follows (in millions):


	As of March 31, 2021		As of March 31, 2020
Senior Notes:
4.80% Senior Notes due 2026	$	400	$	400
1.85% Senior Notes due 2031	750		—
2.95% Senior Notes due 2051	750		—
3.70% Senior Notes due 2021	—		600
Total principal amount	$	1,900	$	1,000
Unaccreted discount	(7)		(1)
Unamortized debt issuance costs	(17)		(3)
Net carrying value of Senior Notes	$	1,876	$	996

Fair value of Senior Notes (Level 2)	$	1,873	$	1,030

As of March 31, 2021, the remaining life of the 2026 Notes, 2031 Notes and 2051 Notes is approximately 4.9 years, 9.9 years, and 29.9 years, respectively.

The Senior Notes are senior unsecured obligations and rank equally with all our other existing and future unsubordinated obligations and any indebtedness that we may incur from time to time under our Credit Facility.

The 2026 Notes, 2031 Notes and 2051 Notes are redeemable at our option at any time prior to December 1, 2025, November 15, 2030, and August 15, 2050, respectively, subject to a make-whole premium. After such dates, we may redeem each such series of Notes, respectively, at a redemption price equal to 100% of the aggregate principal amount plus accrued and unpaid interest. In addition, upon the occurrence of a change of control repurchase event, the holders of each such series of Notes may require us to repurchase all or a portion of these Notes, at a price equal to 101% of their principal amount, plus accrued and unpaid interest to the date of repurchase. Each such series of Notes also include covenants that limit our ability to incur liens on assets and to enter into sale and leaseback transactions, subject to certain allowances.

Credit Facility

On August 29, 2019, we entered into a $500 million unsecured revolving credit facility (“Credit Facility”) with a syndicate of banks. The Credit Facility terminates on August 29, 2024 unless the maturity is extended in accordance with its terms. The Credit Facility contains an option to arrange with existing lenders and/or new lenders to provide up to an aggregate of $500 million in additional commitments for revolving loans. Proceeds of loans made under the Credit Facility may be used for general corporate purposes.

The loans bear interest, at our option, at the base rate plus an applicable spread or an adjusted LIBOR rate plus an applicable spread, in each case with such spread being determined based on our debt credit ratings. We are also obligated to pay other customary fees for a credit facility of this size and type. Interest is due and payable in arrears quarterly for loans bearing interest at the base rate and at the end of an interest period (or at each three month interval in the case of loans with interest periods greater than three months) in the case of loans bearing interest at the adjusted LIBOR rate. Principal, together with all accrued and unpaid interest, is due and payable at maturity. We may prepay the loans and terminate the commitments, in whole or in part, at any time without premium or penalty, subject to certain conditions. LIBOR is expected to be discontinued, and the Credit Facility contains a process by which we and the administrative agent agree on an alternate rate in such event. If we fail to agree on an alternate rate, then any loans will bear interest at a base rate tied to an ABR Borrowing rate, plus an applicable spread.

The credit agreement contains customary affirmative and negative covenants, including covenants that limit or restrict our ability to, among other things, incur subsidiary indebtedness, grant liens, and dispose of all or substantially all assets, in each case subject to customary exceptions for a credit facility of this size and type. We are also required to maintain compliance with a debt to EBITDA ratio. As of March 31, 2021, we were in compliance with the debt to EBITDA ratio.

The credit agreement contains customary events of default, including among others, non-payment defaults, covenant defaults, cross-defaults to material indebtedness, bankruptcy and insolvency defaults, material judgment defaults and a change of control default, in each case, subject to customary exceptions for a credit facility of this size and type. The occurrence of an event of default could result in the acceleration of the obligations under the Credit Facility and an increase in the applicable interest rate.

As of March 31, 2021 and 2020, no amounts were outstanding under the Credit Facility. $2 million of debt issuance costs that were paid in connection with obtaining this credit facility are being amortized to interest expense over the 5-year term of the Credit Facility.

Interest Expense

The following table summarizes our interest expense recognized for fiscal years 2021, 2020, and 2019 that is included in interest and other income (expense), net on our Consolidated Statements of Operations (in millions):


	Year Ended March 31,
	2021		2020		2019
Amortization of debt discount	$	—	$	—	$	(1)
Amortization of debt issuance costs	(2)		(2)		(2)
Coupon interest expense	(43)		(42)		(41)
Other interest expense	—		—		(1)
Total interest expense	$	(45)	$	(44)	$	(45)