NOTE E – BORROWINGS AND CREDIT ARRANGEMENTS

We had total debt of $7.056 billion as of December 31, 2018 and $5.616 billion as of December 31, 2017. The debt maturity schedule for our long-term debt obligations is presented below:



	Issuance Date	Maturity Date	As of December 31,						Semi-annual Coupon Rate
(in millions, except interest rates)	Issuance Date	Maturity Date	2018			2017			Semi-annual Coupon Rate
January 2020 Notes	December 2009	January 2020	$	850		$	850		6.000%
May 2020 Notes	May 2015	May 2020	600			600			2.850%
May 2022 Notes	May 2015	May 2022	500			500			3.375%
October 2023 Notes	August 2013	October 2023	450			450			4.125%
May 2025 Notes	May 2015	May 2025	750			750			3.850%
March 2028 Notes	February 2018	March 2028	1,000			—			4.000%
November 2035 Notes (1)	November 2005	November 2035	350			350			7.000%
January 2040 Notes	December 2009	January 2040	300			300			7.375%
Unamortized Debt Issuance Discount and Deferred Financing Costs		2020 - 2040	(29		)	(24		)
Unamortized Gain on Fair Value Hedges		2020-2025	26			38
Capital Lease Obligation		Various	6			1
Long-term debt			$	4,803		$	3,815

Note: The table above does not include unamortized amounts related to interest rate contracts designated as cash flow hedges.


(1)	Corporate credit rating improvements may result in a decrease in the adjusted interest rate on our November 2035 Notes to the extent that our lowest credit rating is above BBB- or Baa3. The interest rates on our November 2035 Notes will be permanently reinstated to the issuance rate if the lowest credit ratings assigned to these senior notes is either A- or A3 or higher.

Revolving Credit Facility

On December 19, 2018, we entered into a $2.750 billion revolving credit facility (the 2018 Facility) with a global syndicate of commercial banks and terminated our previous $2.250 billion revolving credit facility (the 2017 Facility), which was scheduled to mature in August 2022. The 2018 Facility will mature on December 19, 2023 with one-year extension options subject to certain conditions. Eurodollar and multicurrency loans bear interest at the Eurocurrency Rate determined for the interest period plus the applicable margin, based on our corporate credit ratings (1.02 percent as of December 31, 2018). ABR loans bear interest at ABR plus the applicable margin of up to 0.40 percent, based on our corporate credit ratings. Under the credit agreement for the 2018 Facility (the 2018 Credit Agreement), we are required to pay a facility fee (0.11 percent as of December 31, 2018) based on our credit ratings and the total amount of revolving credit commitment, regardless of usage of the 2018 Facility. This facility provides backing for the commercial paper program described below. There were no amounts borrowed under our current or prior revolving credit facilities as of December 31, 2018 or December 31, 2017.

Bridge Facility

On November 20, 2018, we entered into the Bridge Facility in aggregate principal amount of £3.315 billion for the purpose of financing the proposed BTG Acquisition. The Bridge Facility is comprised of a £3.115 billion debt bridge facility, borrowings under which mature 364 days from the date of the first borrowing under the Bridge Facility, and a £200 million cash bridge facility, borrowings under which mature 90 days from the date of the first borrowing under the Bridge Facility. Borrowings are available in British pound sterling or U.S. dollar and bear interest at the LIBOR for borrowings in British pound sterling or U.S. dollar, as applicable, or the base rate for borrowings in U.S. dollars, in each case plus an applicable margin based on our public debt ratings. The Bridge Facility also provides for customary ticking fees based on our public debt ratings and duration fees. The Bridge Facility requires that we maintain certain financial covenants, as described within Debt Covenants below. The Bridge Facility contains customary events of default, which may result in the acceleration of any outstanding commitments and also contains customary United Kingdom (U.K.) certain funds provisions. There were no amounts borrowed under the Bridge Facility as of December 31, 2018. In December 2018, in connection with our new term loans and currency hedging activities, we reduced the debt bridge facility by an aggregate amount of £1.569 billion to a remaining available amount of £1.546 billion. Refer to Note B – Acquisitions and Strategic Investments for a discussion of our currency hedging activities.

Term Loans

On December 19, 2018, we entered into the First Amendment to our $1.000 billion Term Loan Credit Agreement (August 2019 Term Loan), which was originally entered into August 20, 2018, which matures on August 19, 2019 and is presented within Current debt obligations in the accompanying consolidated balance sheets. Borrowings under the August 2019 Term Loan bear interest at an annual rate of LIBOR plus 0.65 percent. The August 2019 Term Loan requires that we comply with certain covenants, including financial covenants as described within Debt Covenants below. As of December 31, 2018, we had $1.000 billion outstanding under our August 2019 Term Loan. We used the proceeds from the August 2019 Term Loan to repay a portion of our outstanding commercial paper.

On December 19, 2018, we entered into a $2.000 billion senior unsecured delayed-draw term loan facility consisting of a $1.000 billion two-year delayed draw term loan credit facility maturing in two years from the date of the closing of the proposed BTG Acquisition (Two-Year Delayed Draw Term Loan) and a $1.000 billion three-year delayed draw term loan credit facility maturing in three years from the date of the closing of the proposed BTG Acquisition (Three-Year Delayed Draw Term Loan). Borrowings are available in U.S. dollars and bear interest at LIBOR or a base rate in each case plus an applicable margin based on our public debt ratings. We are required to pay customary ticking fees on the average daily unused commitments based on our public debt ratings. The facilities contain customary representations and covenants, as described within Debt Covenants below. The facilities contain customary events of default, which may result in the acceleration of any outstanding commitments, and also contains customary U.K. certain funds provisions. Any proceeds from the facilities will be available to refinance in part the commitments outstanding under the Bridge Facility, described above, to finance the proposed BTG Acquisition. As of December 31, 2018, we had no amounts borrowed under the Two-Year Delayed Draw Term Loan or the Three-Year Delayed Draw Term Loan.

Debt Covenants

As of and through December 31, 2018, we were in compliance with all the required covenants related to our debt obligations.

All existing credit arrangements described above require that we maintain certain financial covenants, as follows:



	Covenant Requirement as of December 31, 2018	Actual as of December 31, 2018
Maximum leverage ratio (1)	3.75 times	2.56 times

(1) Ratio of total debt to consolidated EBITDA, as defined by the agreements, for the preceding four consecutive fiscal quarters.

Our covenants require that we maintain a maximum leverage ratio of 3.75 times, provided, however, that for the two consecutive fiscal quarters ended immediately following the consummation of a Qualified Acquisition, as defined by each agreement below, the maximum leverage ratio shall be 4.75 times, and then subject to a step-down for each succeeding fiscal quarter end to 4.5 times, 4.25 times, 4.00 times and then back to 3.75 times for each fiscal quarter end thereafter. Our covenants provide for an exclusion from the calculation of consolidated EBITDA, as defined by the agreements, through maturity, of any non-cash charges and up to $500 million in restructuring charges and restructuring-related expenses related to our current or future restructuring plans. As of December 31, 2018, we had $350 million of the restructuring charge exclusion remaining. In addition, any cash litigation payments (net of any cash litigation receipts), as defined by the agreements, are excluded from the calculation of consolidated EBITDA, as defined by the agreements, provided that the sum of any excluded net cash litigation payments do not exceed $2.624 billion in the aggregate. As of December 31, 2018, we had approximately $1.191 billion of the legal exclusion remaining.

A Qualified Acquisition, as defined by the 2018 Credit Agreement and August 2019 Term Loan, includes but is not limited to the proposed BTG Acquisition. A Qualified Acquisition, as defined by the Bridge Facility, Two-Year Delayed Draw Term Loan and Three-Year Delayed Draw Term Loan, is limited to the proposed BTG Acquisition and any other transaction permitted under the Bridge Facility and consummated on or after the Closing date, as defined by the Bridge Facility.

Any inability to maintain compliance with these covenants could require us to seek to renegotiate the terms of our credit facility or seek waivers from compliance with these covenants, both of which could result in additional borrowing costs. Further, there can be no assurance that our lenders would agree to such new terms or grant such waivers on terms acceptable to us. In this case, all credit facility commitments would terminate, and any amounts borrowed under the facility would become immediately due and payable. Furthermore, any termination of our credit facility may negatively impact the credit ratings assigned to our commercial paper program which may impact our ability to refinance any then outstanding commercial paper as it becomes due and payable.

Commercial Paper



	As of December 31,
	2018			2017
Commercial paper outstanding (in millions)	$	1,248		$	1,197
Maximum borrowing capacity (in millions)	2,750			2,250
Borrowing capacity available (in millions)	1,502			1,053
Weighted average maturity (in days)	27			38
Weighted average yield	3.04		%	1.85		%

Outstanding commercial paper directly reduces borrowing capacity and is backed by the 2018 Facility.

Senior Notes

We had senior notes outstanding of $4.800 billion as of December 31, 2018 and $4.400 billion as of December 31, 2017.

In February 2018, we completed an offering of $1.000 billion in aggregate principal amount of 4.000% senior notes, due March 2028. We used a portion of the net proceeds from the offering to repay the $600 million plus accrued interest of our 2.650% senior notes due in October 2018, which were classified as short-term debt as of December 31, 2017. The remaining proceeds were used to repay a portion of our outstanding commercial paper.

Our senior notes were issued in public offerings, are redeemable prior to maturity and are not subject to sinking fund requirements. Our senior notes are unsecured, unsubordinated obligations and rank on parity with each other. These notes are effectively junior to borrowings under our credit and security facility, to the extent if borrowed by our subsidiaries and to liabilities of our subsidiaries (see Other Arrangements below).

Our $4.450 billion of senior notes issued in 2009, 2013, 2015 and 2018 contain a change-in-control provision, which provides that each holder of the senior notes may require us to repurchase all or a portion of the notes at a price equal to 101 percent of the aggregate repurchased principal, plus accrued and unpaid interest, if a rating event, as defined in the indenture, occurs as a result of a change-in-control, as defined in the indenture. Any other credit rating changes may impact our borrowing cost, but do not require us to repay any borrowings.

Other Arrangements

On December 19, 2018 and effective on December 20, 2018, we terminated our $400 million credit and security facility secured by our U.S. trade receivables. We had no amounts outstanding under this facility as of December 31, 2017.

We have accounts receivable factoring programs in certain European countries and with commercial banks in Japan which include promissory notes discounting programs. We account for our factoring programs as sales under FASB ASC Topic 860, Transfers and Servicing. We have no retained interest in the transferred receivables, other than collection and administration, and once sold, the accounts receivable are no longer available to satisfy creditors in the event of bankruptcy. Amounts de-recognized for accounts and notes receivable, which are excluded from Trade accounts receivable, net in the accompanying consolidated balance sheets, are aggregated by contract denominated currency below (in millions):



	As of December 31, 2018						As of December 31, 2017
Factoring Arrangements	Capacity (1)		Amount De-recognized		Weighted Average Interest Rate		Capacity (1)		Amount De-recognized		Weighted Average Interest Rate
Euro denominated	$	474	$	165	2.7	%	$	456	$	171	1.8	%
Yen denominated (2)	273		195		0.9	%	195		157		1.3	%


(1)	The capacities are translated from local currency to U.S. dollar using the spot rates on the last business day of each period.


(2)	The factoring arrangements denominated in Japanese yen consist of two arrangements, one with a maximum capacity of 22.000 billion yen, which has been discontinued in the second quarter of 2018, and a new arrangement with a maximum capacity of 30.000 billion yen entered into in March 2018.