Debt

6 Months Ended

Jun. 30, 2019

Note 6. Debt

Significant Debt Transactions

The following table shows the transactions that occurred during the six months ended June 30, 2019.

February Exchange Offers



(dollars in millions)	Principal Amount Exchanged		Principal Amount Issued
Verizon 1.750% - 5.150% notes and floating rate notes, due 2021 - 2025	$	3,892	$	—
GTE LLC 8.750% debentures, due 2021	21		—
Verizon 4.016% notes due 2029 ⁽¹⁾	—		4,000
Total	$	3,913	$	4,000

⁽¹⁾Total exchange amount issued in consideration does not include an insignificant amount of cash used to settle.

May Tender Offers



(dollars in millions)	Principal Amount Purchased		Cash Consideration ⁽¹⁾
Verizon 5.012% notes due 2054	$	3,192	$	3,626
Verizon 4.672% notes due 2055	1,308		1,404
Total	$	4,500	$	5,030

⁽¹⁾In addition to the purchase price, any accrued and unpaid interest on the purchased notes was paid to the date of purchase.

Debt Redemptions, Repurchases and Repayments



(dollars in millions)	Principal Redeemed / Repaid		Amount Paid as % of Principal⁽¹⁾
March 2019
Verizon 5.900% notes due 2054	$	500	100.000	%
Verizon 1.375% notes due 2019	206		100.000	%
Verizon 1.750% notes due 2021	621		100.000	%
Verizon 3.000% notes due 2021	930		101.061	%
Verizon 3.500% notes due 2021	315		102.180	%
Open market repurchases of various Verizon notes	163		Various
March 2019 total	2,735

June 2019
Verizon 2.625% notes due 2020	831		100.037	%
Verizon 3.500% notes due 2021	736		102.238	%
Verizon floating rate (LIBOR + 0.770%) notes due 2019	229		100.000	%
June 2019 total	1,796
Total	$	4,531

⁽¹⁾ Percentages represent price paid to redeem, repurchase and repay.

Debt Issuances



(amounts in millions)	Principal Amount Issued		Net Proceeds ⁽¹⁾
March 2019
Verizon 3.875% notes due 2029⁽²⁾	$	1,000	$	994
Verizon 5.000% notes due 2051	510		506
March 2019 total	$	1,510	$	1,500

June 2019
Verizon 0.875% notes due 2027	€	1,250	1,391
Verizon 1.250% notes due 2030	€	1,250	1,385
Verizon 2.500% notes due 2031	£	500	647
June 2019 total			3,423
Total			$	4,923

⁽¹⁾Net proceeds were net of discount and issuance costs.

⁽²⁾An amount equal to the net proceeds from this green bond will be used to fund, in whole or in part, "Eligible Green Investments." "Eligible Green Investments" include new and existing investments made by us during the period from two years prior to the issuance of the green bond through the maturity date of the green bond, in the following categories: (1) renewable energy; (2) energy efficiency; (3) green buildings; (4) sustainable water management; and (5) biodiversity and conservation.

Short-Term Borrowing and Commercial Paper Program

During the three months ended June 30, 2019, we repaid $600 million in aggregate from the short term credit facility and there was no outstanding balance as of June 30, 2019.

As of June 30, 2019, we had $200 million of commercial paper outstanding.

Asset-Backed Debt

As of June 30, 2019, the carrying value of our asset-backed debt was $11.3 billion. Our asset-backed debt includes Asset-Backed Notes (ABS Notes) issued to third-party investors (Investors) and loans (ABS Financing Facilities) received from banks and their conduit facilities (collectively, the Banks). Our consolidated asset-backed debt bankruptcy remote legal entities (each, an ABS Entity or collectively, the ABS Entities) issue the debt or are otherwise party to the transaction documentation in connection with our asset-backed debt transactions. Under the terms of our asset-backed debt, Cellco Partnership (Cellco) and certain other affiliates of Verizon (collectively, the Originators) transfer device payment plan agreement receivables to one of the ABS Entities, which in turn transfers such receivables to another ABS Entity that issues the debt. Verizon entities retain the equity interests in the ABS Entities, which represent the rights to all funds not needed to make required payments on the asset-backed debt and other related payments and expenses.

Our asset-backed debt is secured by the transferred device payment plan agreement receivables and future collections on such receivables. The device payment plan agreement receivables transferred to the ABS Entities and related assets, consisting primarily of restricted cash, will only be available for payment of asset-backed debt and expenses related thereto, payments to the Originators in respect of additional transfers of device payment plan agreement receivables, and other obligations arising from our asset-backed debt transactions, and will not be available to pay other obligations or claims of Verizon’s creditors until the associated asset-backed debt and other obligations are satisfied. The Investors or Banks, as applicable, which hold our asset-backed debt have legal recourse to the assets securing the debt, but do not have any recourse to Verizon with respect to the payment of principal and interest on the debt. Under a parent support agreement, Verizon has agreed to guarantee certain of the payment obligations of Cellco and the Originators to the ABS Entities.

Cash collections on the device payment plan agreement receivables collateralizing asset-backed debt securities are required at certain specified times to be placed into segregated accounts. Deposits to the segregated accounts are considered restricted cash and are included in Prepaid expenses and other and Other assets in our condensed consolidated balance sheets.

Proceeds from our asset-backed debt transactions are reflected in Cash flows from financing activities in our condensed consolidated statements of cash flows. The asset-backed debt issued and the assets securing this debt are included in our condensed consolidated balance sheets.

ABS Notes

During the six months ended June 30, 2019, we completed the following ABS Notes transactions:



(dollars in millions)	Interest Rates %		Expected Weighted-average Life to Maturity (in years)	Principal Amount Issued
March 2019
A-1a Senior class notes	2.930		2.50	$	900
A-1b Senior floating rate class notes	LIBOR + 0.330	⁽¹⁾	2.50	100
B Junior class notes	3.020		3.22	69
C Junior class notes	3.220		3.40	53
March 2019 total				1,122

June 2019
A-1a Senior class notes	2.330		2.52	855
A-1b Senior floating rate class notes	LIBOR + 0.450	⁽¹⁾	2.52	145
B Junior class notes	2.400		3.28	69
C Junior class notes	2.600		3.47	53
June 2019 total				1,122
Total				$	2,244

⁽¹⁾ The one-month London Interbank Offered Rate (LIBOR) rate at June 30, 2019 was 2.398%.

Under the terms of each series of ABS Notes, there is a two year revolving period during which we may transfer additional receivables to the ABS Entity. In April 2019, the two year revolving period of the ABS Notes issued in March 2017 ended and we began to repay principal on the 2017-1 Class A senior ABS Notes. During the three and six months ended June 30, 2019, we made aggregate principal repayments of $794 million and $1.4 billion, respectively, for all ABS Notes.

ABS Financing Facilities

In May 2018, we entered into an ABS financing facility with a number of financial institutions (2018 ABS Financing Facility). One loan agreement was entered into in connection with the 2018 ABS financing facility. During the three months ended June 30, 2019, the remaining $540 million outstanding under the loan agreement was prepaid, and the loan agreement was terminated.

In September 2016, we entered into an ABS Financing Facility with a number of financial institutions, which was amended and restated in May 2019 (2019 ABS Financing Facility). Under the terms of the 2019 ABS Financing Facility, the financial institutions made advances under asset-backed loans backed by device payment plan agreement receivables of both consumer and business customers. Two loan agreements were entered into in connection with the 2019 ABS Financing Facility in September 2016 and May 2017 and a third was entered into in May 2019. The 2016 and 2017 loan agreements had a final maturity date in March 2021 and bore interest at a floating rate. The two year revolving period of the two loan agreements ended in September 2018. The 2019 loan agreement has a final maturity date in May 2023 and bears interest at floating rates. There is a one year revolving period until May 2020, which may be extended with the approval of the financial institutions. Under all of the loan agreements, we have the right to prepay all or a portion of the advances at any time without penalty, but in certain cases, with breakage costs. Subject to certain conditions, we may also remove receivables from the ABS Entity. During the three months ended June 30, 2019, we paid off both the 2016 and 2017 loans for an aggregate of $671 million primarily with proceeds from the 2019 loan agreement. As of June 30, 2019, there was an outstanding balance under the 2019 ABS Financing Facility of $1.8 billion. In August 2019, we prepaid $1.5 billion of the loan made in May 2019 under the 2019 ABS Financing Facility.

Variable Interest Entities (VIEs)

The ABS Entities meet the definition of a VIE for which we have determined that we are the primary beneficiary as we have both the power to direct the activities of the entity that most significantly impact the entity’s performance and the obligation to absorb losses or the right to receive benefits of the entity. Therefore, the assets, liabilities and activities of the ABS Entities are consolidated in our financial results and are included in amounts presented on the face of our condensed consolidated balance sheets.

The assets and liabilities related to our asset-backed debt arrangements included in our condensed consolidated balance sheets were as follows:



	At June 30,		At December 31,
(dollars in millions)	2019		2018
Assets
Account receivable, net	$	10,095	$	8,861
Prepaid expenses and other	1,020		989
Other assets	3,353		2,725

Liabilities
Accounts payable and accrued liabilities	11		7
Short-term portion of long-term debt	4,477		5,352
Long-term debt	6,775		4,724

See Note 7 for additional information on device payment plan agreement receivables used to secure asset-backed debt.

Credit Facilities

As of June 30, 2019, the unused borrowing capacity under our $9.5 billion credit facility was approximately $9.4 billion. The credit facility does not require us to comply with financial covenants or maintain specified credit ratings, and it permits us to borrow even if our business has incurred a material adverse change. We use the credit facility for the issuance of letters of credit and for general corporate purposes.

In March 2016, we entered into a $1.0 billion credit facility insured by Eksportkreditnamnden, an export credit agency with a maturity date of December 2024. As of June 30, 2019, the outstanding balance was $647 million. We used this credit facility to finance network equipment-related purchases. In July 2017, we entered into credit facilities insured by various export credit agencies providing us with the ability to borrow up to $4.0 billion to finance equipment-related purchases with maturity dates ranging from July 2022 to May 2027. The facilities have multiple borrowings available, portions of which extend through October 2019, contingent upon the amount of eligible equipment-related purchases that we make. During the three and six months ended June 30, 2019, we drew down $450 million and $874 million, respectively, from these facilities. During the six months ended June 30, 2018, we drew down $1.7 billion from these facilities. As of June 30, 2019, we had an outstanding balance of $3.5 billion.

Non-Cash Transaction

During the six months ended June 30, 2019 and 2018, we financed, primarily through vendor financing arrangements, the purchase of approximately $221 million and $862 million respectively, of long-lived assets consisting primarily of network equipment. At both June 30, 2019 and 2018, $1.0 billion and $1.4 billion, respectively, relating to these financing arrangements, including those entered into in prior years and liabilities assumed through acquisitions, remained outstanding. These purchases are non-cash financing activities and therefore are not reflected within Capital expenditures in our condensed consolidated statements of cash flows.

Early Debt Redemptions

During both the three and six months ended June 30, 2019, we recorded losses on early debt redemptions of $1.5 billion related to the May tender offers and other insignificant transactions, which were recorded in Other income (expense), net in our condensed consolidated statements of income.

During the six months ended June 30, 2018, we recorded losses on early debt redemptions of $249 million related to the 2018 March tender offers for 13 series of notes issued by Verizon with coupon rates ranging from 1.750% to 5.012% and maturity dates ranging from 2021 to 2055, which were recorded in Other income (expense), net in our condensed consolidated statements of income.

Guarantees

We guarantee the debentures of our operating telephone company subsidiaries. As of June 30, 2019, $796 million aggregate principal amount of these obligations remained outstanding. Each guarantee will remain in place for the life of the obligation unless terminated pursuant to its terms, including the operating telephone company no longer being a wholly-owned subsidiary of Verizon.

We also guarantee the debt obligations of GTE LLC as successor in interest to GTE Corporation that were issued and outstanding prior to July 1, 2003. As of June 30, 2019, $423 million aggregate principal amount of these obligations remained outstanding.