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Note 14 - Debt
 12 Months Ended
Dec. 31, 2021
Notes to Financial Statements  
Debt Disclosure [Text Block]

14. Debt

 

Total debt as of December 31, 2021 and 2020 is summarized below:

 

Millions

 

2021

  

2020

 

Notes and debentures, 2.2% to 7.1% due through April 6, 2071

 $29,508  $26,608 

Equipment obligations, 2.6% to 6.2% due through January 2, 2031

  848   885 

Commercial paper, 0.2% to 0.3% due through January 26, 2022

  400   75 

Finance leases, 3.1% to 8.0% due through December 10, 2028

  336   449 

Receivables Facility (Note 10)

  300   - 

Term loans - floating rate, due August 31, 2022

  100   250 

Unamortized discount and deferred issuance costs

  (1,763)  (1,538)

Total debt

  29,729   26,729 

Less: current portion

  (2,166)  (1,069)

Total long-term debt

 $27,563  $25,660 

 

Debt Maturities – The following table presents aggregate debt maturities as of December 31, 2021, excluding market value adjustments:

 

Millions

    

2022

 $2,180 

2023

  1,385 

2024

  1,439 

2025

  1,429 

2026

  1,016 

Thereafter

  24,043 

Total principal

  31,492 

Unamortized discount and deferred issuance costs

  (1,763)

Total debt

 $29,729 

 

Equipment Encumbrances – Equipment with a carrying value of approximately $1.2 billion and $1.3 billion at December 31, 2021 and 2020, respectively, served as collateral for finance leases and other types of equipment obligations in accordance with the secured financing arrangements utilized to acquire or refinance such railroad equipment.

 

Debt Redemptions – On November 1, 2020, we redeemed all $500 million of outstanding 4.0% notes due February 1, 2021, at a redemption price equal to 100% of the principal amount of the notes plus accrued and unpaid interest.

 

Debt Exchange - On April 6, 2021, we exchanged approximately $1.7 billion of various outstanding notes and debentures due between 2028 and 2065 (Existing Notes) for $701 million of 2.891% notes due April 6, 2036 (New 2036 Notes) and $1.0 billion of 3.799% notes due April 6, 2071 (New 2071 Notes), plus cash consideration of approximately $257 million in addition to $14 million for accrued and unpaid interest on the Existing Notes. In accordance with ASC 470-50-40, Debt-Modifications and Extinguishments-Derecognition, this transaction was accounted for as a debt exchange, as the exchanged debt instruments are not considered to be substantially different. The cash consideration was recorded as an adjustment to the carrying value of debt, and the balance of the unamortized discount and issue costs from the Existing Notes is being amortized as an adjustment of interest expense over the terms of the new notes. No gain or loss was recognized as a result of the exchange. Costs related to the debt exchange that were payable to parties other than the debt holders totaled approximately $13 million and were included in interest expense during 2021.

 

On September 16, 2020, we exchanged $1,047 million of various outstanding notes and debentures due between May 1, 2037, and March 1, 2049 (the Existing Notes), for $1,047 million of 2.973% notes (the New Notes) due September 16, 2062, plus cash consideration of approximately $319 million in addition to $4 million for accrued and unpaid interest on the Existing Notes. In accordance with ASC 470-50-40, Debt-Modifications and Extinguishments-Derecognition, this transaction was accounted for as a debt exchange, as the exchanged debt instruments are not considered to be substantially different. The cash consideration was recorded as an adjustment to the carrying value of debt, and the balance of the unamortized discount and issue costs from the Existing Notes is being amortized as an adjustment of interest expense over the terms of the New Notes. No gain or loss was recognized as a result of the exchange. Costs related to the debt exchange that were payable to parties other than the debt holders totaled approximately $9 million and were included in interest expense during the quarter ended September 30, 2020.

 

Credit Facilities – At December 31, 2021, we had $2.0 billion of credit available under our revolving credit facility, which is designated for general corporate purposes and supports the issuance of commercial paper. Credit facility withdrawals totaled $0 during 2021. Commitment fees and interest rates payable under the Facility are similar to fees and rates available to comparably rated, investment-grade borrowers. The Facility allows for borrowings at floating rates based on LIBOR, plus a spread, depending upon credit ratings for our senior unsecured debt. The 5-year facility, set to expire on June 8, 2023, requires UPC to maintain a debt-to-EBITDA (earnings before interest, taxes, depreciation, and amortization) coverage ratio.

 

The definition of debt used for purposes of calculating the debt-to-EBITDA coverage ratio includes, among other things, certain credit arrangements, finance leases, guarantees, unfunded and vested pension benefits under Title IV of ERISA, and unamortized debt discount and deferred debt issuance costs. At December 31, 2021, the Company was in compliance with the debt-to-EBITDA coverage ratio, which allows us to carry up to $41.2 billion of debt (as defined in the Facility), and we had $31.5 billion of debt (as defined in the Facility) outstanding at that date. The Facility does not include any other financial restrictions, credit rating triggers (other than rating-dependent pricing), or any other provision that could require us to post collateral. The Facility also includes a $150 million cross-default provision and a change-of-control provision.

 

During 2021, we issued $2.1 billion and repaid $1.8 billion of commercial paper with maturities ranging from 7 to 86 days. As of December 31, 2021 and 2020, we had $400 million and $75 million of commercial paper outstanding, respectively. Our revolving credit facility supports our outstanding commercial paper balances, and, unless we change the terms of our commercial paper program, our aggregate issuance of commercial paper will not exceed the amount of borrowings available under the Facility.

 

In May 2020, we entered into three bilateral revolving credit lines, totaling $600 million of available credit. Since entering into the three bilateral revolving credit lines, we drew $300 million and repaid $300 million. All three bilateral revolving credit lines matured by May 18, 2021.

 

Shelf Registration Statement and Significant New Borrowings – We filed an automatic shelf registration statement with the SEC that became effective on February 10, 2021. The Board of Directors authorized the issuance of up to $6 billion of debt securities, replacing the prior Board authorization in November 2019, which had $2.25 billion of authority remaining. Under our shelf registration, we may issue, from time to time any combination of debt securities, preferred stock, common stock, or warrants for debt securities or preferred stock in one or more offerings.

 

During 2021, we issued the following unsecured, fixed-rate debt securities under our shelf registration:

 

Date

Description of Securities

May 20, 2021

$850 million of 2.375% Notes due May 20, 2031

 

$1.0 billion of 3.200% Notes due May 20, 2041

 

$650 million of 3.550% Notes due May 20, 2061

September 10, 2021

$150 million of 2.375% Notes due May 20, 2031

 

$850 million of 2.950% Notes due March 10, 2052

 

We used the net proceeds from the offerings for general corporate purposes, including the repurchase of common stock pursuant to our share repurchase programs. These debt securities include change-of-control provisions. At December 31, 2021, we had remaining authority to issue up to $2.5 billion of debt securities under our shelf registration.

 

On February 3, 2022, the Board of Directors renewed its authorization for the Company to issue up to $12.0 billion of debt securities under the Shelf. This reauthorization replaces the authorization in 2021.

 

Receivables Securitization Facility – As of December 31, 2021 and 2020, we recorded $300 million and $0, respectively, of borrowings under our Receivables Facility, as secured debt. (See further discussion of our receivables securitization facility in Note 10.)

 

LIBOR Transition – Each of our $2.0 billion revolving credit facility, term loan, and Receivables Facility currently use LIBOR as the benchmark for the floating interest rates. Authorities that regulate LIBOR have announced plans to phase out LIBOR so that it will, at some point, cease to exist as a benchmark for floating interest rates. To address the phase out of LIBOR, the agreements for substantially all of these facilities include a mechanism to replace LIBOR with an alternative rate or benchmark under specified circumstances through an amendment to the agreements. As part of this process, we will need to renegotiate our agreements to reference that alternative rate or benchmark, and may need to modify our existing benchmark replacement language, or obtain replacement facilities.