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Borrowings and Credit Arrangements | 3 Months Ended
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Mar. 31, 2020
Debt Disclosure [Abstract] |
BORROWINGS AND CREDIT ARRANGEMENTS | NOTE E – CONTRACTUAL OBLIGATIONS AND COMMITMENTS Borrowings and Credit Arrangements We had total debt of $10.336 billion as of March 31, 2020 and $10.008 billion as of December 31, 2019. The debt maturity schedule for our long-term debt obligations is presented below:
(in millions, except interest rates) |  | Issuance Date |  | Maturity Date |  | As of |  | Coupon Rate (1)
| March 31, 2020 |  | December 31, 2019 |
December 2020 Term Loan (3) |  | December 2019 |  | December 2020 |  | 400 |  |  | — |  |  |
May 2022 Notes |  | May 2015 |  | May 2022 |  | 500 |  |  | 500 |  |  | 3.375%
August 2022 Term Loan |  | August 2019 |  | August 2022 |  | — |  |  | 1,000 |  |  |
October 2023 Notes |  | August 2013 |  | October 2023 |  | 244 |  |  | 244 |  |  | 4.125%
Revolving Credit Facility |  | n/a |  | December 2023 |  | 1,360 |  |  | — |  |  |
March 2024 Notes |  | February 2019 |  | March 2024 |  | 850 |  |  | 850 |  |  | 3.450%
May 2025 Notes |  | May 2015 |  | May 2025 |  | 523 |  |  | 523 |  |  | 3.850%
March 2026 Notes |  | February 2019 |  | March 2026 |  | 850 |  |  | 850 |  |  | 3.750%
December 2027 Notes |  | November 2019 |  | December 2027 |  | 988 |  |  | 1,011 |  |  | 0.625%
March 2028 Notes |  | February 2018 |  | March 2028 |  | 434 |  |  | 434 |  |  | 4.000%
March 2029 Notes |  | February 2019 |  | March 2029 |  | 850 |  |  | 850 |  |  | 4.000%
November 2035 Notes (2) |  | November 2005 |  | November 2035 |  | 350 |  |  | 350 |  |  | 7.000%
March 2039 Notes |  | February 2019 |  | March 2039 |  | 750 |  |  | 750 |  |  | 4.550%
January 2040 Notes |  | December 2009 |  | January 2040 |  | 300 |  |  | 300 |  |  | 7.375%
March 2049 Notes |  | February 2019 |  | March 2049 |  | 1,000 |  |  | 1,000 |  |  | 4.700%
Unamortized Debt Issuance Discount and Deferred Financing Costs |  |  |  | 2020 - 2049 |  | (79 | ) |  | (83 | ) |  |
Unamortized Gain on Fair Value Hedges |  |  |  | 2020 - 2023 |  | 7 |  |  | 7 |  |  |
Finance Lease Obligation |  |  |  | Various |  | 7 |  |  | 6 |  |  |
Long-term debt |  |  |  |  |  | $ | 9,331 |  |  | $ | 8,592 |  |  |
Note: The table above does not include unamortized amounts related to interest rate contracts designated as cash flow hedges.
(1) | Coupon rates are semi-annual, except for the December 2027 Notes, which bears an annual coupon, and the August 2022 Term Loan and Revolving Credit Facility, which are variable-rate instruments based on LIBOR.
(2) | 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.
(3) | We have classified the $400 million of term loan borrowings due in December 2020 as non-current, due to the repayment prior to the issuance of our unaudited condensed consolidated financial statements for the period ending March 31, 2020 using proceeds from our April 2021 Term Loan that does not require repayment within one year from the balance sheet date.
Revolving Credit Facility As of March 31, 2020 and December 31, 2019, we maintained a $2.750 billion revolving credit facility (2018 Facility) with a global syndicate of commercial banks that matures on December 19, 2023 with one-year extension options subject to certain conditions. On April 21, 2020, we entered into an amendment of the credit agreement as described within Debt Covenant below. This facility provides backing for the commercial paper program. Outstanding commercial paper directly reduces borrowing capacity under the 2018 Facility. The 2018 Credit Agreement for the 2018 Facility requires that we comply with certain covenants, including a financial covenant as described within Debt Covenant below. In the first quarter of 2020, we refinanced $1.360 billion of commercial paper using proceeds from the revolving credit facility. As of March 31, 2020, we had $1.360 billion outstanding under our revolving credit facility, and there were no amounts outstanding as of December 31, 2019. In April, we used the proceeds from the April 2021 Term Loan, described below, to repay a portion of the amounts outstanding under the Revolving Credit Facility. Term Loans On April 21, 2020 and in a proactive step to offset the potential impact of COVID-19 on our short-term liquidity, we entered into a $1.250 billion term loan credit agreement scheduled to mature on April 20, 2021 (April 2021 Term Loan). The April 2021 Term Loan bears interest at an annual rate of LIBOR plus a margin of 1.875%. The credit agreement is subject to a financial covenant, as described below, and also contains customary events of default, which may result in the acceleration of any outstanding commitments. We used proceeds from the April 2021 Term Loan to repay a portion of the amounts outstanding under the Revolving Credit Facility and the remaining amount under the December 2020 Term Loan, as described below. The credit agreement also contains an accordion feature under which we may borrow additional loans in an aggregate amount not to exceed $400 million on terms identical to the April 2021 Term Loan. On February 27, 2020, we entered into a $1.000 billion term loan credit agreement scheduled to mature on February 25, 2021 (February 2021 Term Loan). On April 21, 2020, we entered into an amendment of the credit agreement as described within Debt Covenant below. The February 2021 Term Loan bears interest at an annual rate of LIBOR plus a margin of 0.85%. The credit agreement is subject to a financial covenant, as described below, and also contains customary events of default, which may result in the acceleration of any outstanding commitments. As of March 31, 2020, we had $1.000 billion outstanding under the February 2021 Term Loan, which is presented within Current debt obligations on our unaudited condensed consolidated balance sheets. We used the proceeds from the February 2021 Term Loan to repay the remaining amounts outstanding of the Three-Year Delayed Draw Term Loan, described below. On December 5, 2019, we entered into a $700 million term loan credit agreement scheduled to mature on December 3, 2020 (December 2020 Term Loan). The December 2020 Term Loan bears interest at an annual rate of LIBOR plus a margin of 0.65%. In addition, we pay customary expenses. The credit agreement is subject to a financial covenant, as described below, and also contains customary events of default, which may result in the acceleration of any outstanding commitments. As of December 31, 2019, we had $700 million outstanding under the December 2020 Term Loan, and we used the proceeds to repay a portion of the Two-Year Delayed Draw Term Loan, described below. In January 2020, we repaid $300 million of the outstanding balance of the December 2020 Term Loan with proceeds from our commercial paper program. As of March 31, 2020, we had $400 million outstanding under the December 2020 Term Loan and used the proceeds from the April 2021 Term Loan to repay the remaining amounts outstanding. 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 acquisition of BTG (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 acquisition of BTG (Three-Year Delayed Draw Term Loan). On August 19, 2019, for the purpose of funding the acquisition of BTG, we borrowed $1.000 billion under the Two-Year Delayed Draw Term Loan and $1.000 billion under the Three-Year Delayed Draw Term Loan. In 2019, we repaid all amounts outstanding on the Two-Year Delayed Draw Term Loan with proceeds from the sale of the Zytiga-related royalty interests, December 2020 Term Loan and commercial paper and terminated the facility. As of December 31, 2019, we had $1.000 billion outstanding under the Three-Year Delayed Draw Term Loan (also referred to as the "August 2022 Term Loan" in the debt maturity schedule above). In the first quarter of 2020, we repaid all amounts outstanding on the Three-Year Delayed Draw Term Loan with proceeds from the February 2021 Term Loan and terminated the facility. As of March 31, 2020, we had no amounts outstanding under the Two and Three-Year Delayed Draw Term Loans and the facilities were terminated. Debt Covenant As of and through March 31, 2020, we were in compliance with the required financial covenant related to our debt obligations. All existing credit arrangements described above require that we maintain the following:
|  | Covenant Requirement |  | Actual
|  | as of March 31, 2020 |  | as of March 31, 2020
Maximum permitted leverage ratio (1) |  | 4.50 times |  | 4.10 times
(1) | Ratio of total debt to consolidated EBITDA, as defined by the credit agreements, for the preceding four consecutive fiscal quarters.
We are required to maintain a maximum permitted leverage ratio of 4.50 times, provided, however, that for the two consecutive fiscal quarters ended immediately following the consummation of a Qualified Acquisition, as defined by each agreement, the maximum permitted leverage ratio shall be 4.75 times, and then subject to a step-down for each succeeding fiscal quarter end to 4.50 times, 4.25 times, 4.00 times and then back to 3.75 times for each fiscal quarter end thereafter. On August 19, 2019, we announced the closing of our acquisition of BTG, a Qualified Acquisition, and therefore our required maximum permitted leverage ratio was reduced to 4.50 times as of and for the quarter ended March 31, 2020. On April 21, 2020, we entered into an agreement with our banking syndicates to amend the financial covenant requirement for all of our outstanding credit arrangements as follows: (i) establish a deemed Consolidated EBITDA of $671 million for the second, third and fourth quarters of 2020, reflecting average quarterly Consolidated EBITDA, as defined in the credit agreements, for 2018 and 2019; and (ii) increase the maximum permitted leverage ratio of 4.75 times through the remainder of 2020, with the above-mentioned step-down beginning in the first quarter of 2021. In addition, pursuant to the April 21, 2020 Revolving Credit Facility and February 2021 Term Loan amendments, the definition of “Material Adverse Effect” has been amended to remove the direct and indirect effects of the COVID-19 pandemic from what constitutes a material adverse effect. The financial covenant requirement provides 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 March 31, 2020, we had $240 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 March 31, 2020, we had $964 million of the litigation exclusion remaining. Any inability to maintain compliance with this amended covenant could require us to seek to further renegotiate the terms of our credit facility or seek waivers from compliance with this covenant, 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 Our commercial paper program is backed by the 2018 Facility, as discussed above. Outstanding commercial paper directly reduces borrowing capacity under the 2018 Facility. In the first quarter of 2020, we refinanced $1.360 billion of commercial paper using proceeds from the revolving credit facility.
| As of
(in millions, except maturity and yield) | March 31, 2020 |  | December 31, 2019
Commercial paper outstanding (at par) | $ | — |  |  | $ | 711 |
Maximum borrowing capacity | 2,750 |  |  | 2,750 |
Borrowing capacity available | 1,390 |  |  | 2,039 |
Weighted average maturity | 0 days |  |  | 55 days |
Weighted average yield | — | % |  | 2.21 | %
Senior Notes We had senior notes outstanding of $7.638 billion as of March 31, 2020 and $7.661 billion as of December 31, 2019. In November 2019, we completed an offering of €900 million (approximately $1.000 billion) in aggregate principal amount of 0.625% senior notes due in 2027 (December 2027 Notes). The Euro-denominated debt principal is a nonderivative instrument designated as a net investment hedge of our net investments in certain of our Euro functional entities. Refer to Note D – Hedging Activities and Fair Value Measurements for additional information. We used a portion of the net proceeds from our November 2019 senior notes offering to repay certain outstanding principal amounts of our senior notes including $206 million of our $450 million 4.125% senior notes due 2023, $566 million of our $1.000 billion 4.000% senior notes due 2028 and $227 million of our $750 million 3.850% senior notes due 2025 and pay accrued and unpaid interest, premiums, fees and expenses in connection with the transaction. In February 2019, we completed an offering of $4.300 billion in aggregate principal amount of senior notes comprised of $850 million of 3.450% senior notes due March 2024, $850 million of 3.750% senior notes due March 2026, $850 million of 4.000% senior notes due March 2029, $750 million of 4.550% senior notes due March 2039 and $1.000 billion of 4.700% senior notes due March 2049. We used a portion of the net proceeds from the offering to repay the $850 million plus accrued interest and premium of our 6.000% senior notes due in January 2020, the $600 million plus accrued interest and premium of our 2.850% senior notes due in May 2020 and the $1.000 billion plus accrued interest of our August 2019 Term Loan. In the third quarter of 2019, the remaining proceeds were used to finance a portion of the acquisition of BTG. 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 liabilities of our subsidiaries (see Other Arrangements below). Other Arrangements 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 unaudited condensed consolidated balance sheets, are aggregated by contract denominated currency below (in millions):
Factoring Arrangements | As of March 31, 2020 |  | As of December 31, 2019
Amount De-recognized |  | Average Interest Rate |  | Amount De-recognized |  | Average Interest Rate
Euro denominated | $ | 147 |  |  | 1.9 | % |  | $ | 171 |  |  | 1.4 | %
Yen denominated | 197 |  |  | 0.6 | % |  | 226 |  |  | 0.6 | %
Other Contractual Obligations and Commitments We had outstanding letters of credit of $107 million as of March 31, 2020 and $105 million as of December 31, 2019, which consisted primarily of bank guarantees and collateral for workers' compensation insurance arrangements. As of March 31, 2020 and December 31, 2019, none of the beneficiaries had drawn upon the letters of credit or guarantees, accordingly, we have not recognized a related liability for our outstanding letters of credit in our unaudited condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019. Refer to Note E – Contractual Obligations and Commitments to our audited financial statements contained in Item 8 of our most recent Annual Report on Form 10-K for additional information on our borrowings and credit agreements.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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