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Note 14 - Debt
 12 Months Ended
Dec. 31, 2022
Notes to Financial Statements  
Debt Disclosure [Text Block]

14. Debt

 

Total debt as of December 31, 2022 and 2021, is summarized below:

 

Millions

 

2022

  

2021

 

Notes and debentures, 2.2% to 7.1% due through February 14, 2072

 $33,658  $29,508 

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

  809   848 

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

  234   336 

Commercial paper, 3.3% to 4.7% due through January 17, 2023

  200   400 

Receivables Facility (Note 10)

  100   300 

Term loans - floating rate, due August 31, 2023

  100   100 

Unamortized discount and deferred issuance costs

  (1,775)  (1,763)

Total debt

  33,326   29,729 

Less: current portion

  (1,678)  (2,166)

Total long-term debt

 $31,648  $27,563 

 

Debt Maturities – The following table presents aggregate debt maturities as of December 31, 2022, excluding market value adjustments:

 

Millions

    

2023

 $1,681 

2024

  1,434 

2025

  1,528 

2026

  1,015 

2027

  1,285 

Thereafter

  28,158 

Total principal

  35,101 

Unamortized discount and deferred issuance costs

  (1,775)

Total debt

 $33,326 

 

Equipment Encumbrances – Equipment with a carrying value of approximately $903 million and $1.2 billion at December 31, 2022 and 2021, 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 Redemption – On April 15, 2022, we redeemed all $750 million of outstanding 4.163% notes due July 15, 2022, 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.

 

Credit Facilities – During 2022, we replaced our $2.0 billion revolving credit facility, which was scheduled to expire on June 8, 2023, with a new $2.0 billion facility that expires May 20, 2027 (the Facility). The Facility is based on substantially similar terms as those in the previous credit facility as described below. At December 31, 2022, 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 2022. 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 Term Secured Overnight Financing Rate (SOFR), plus a spread, depending upon credit ratings for our senior unsecured debt. The Facility, 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, 2022, the Company was in compliance with the debt-to-EBITDA coverage ratio, which allows us to carry up to $46.9 billion of debt (as defined in the Facility), and we had $35.1 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 2022, we issued $3.2 billion and repaid $3.4 billion of commercial paper with maturities ranging from 7 to 88 days. As of December 31, 2022 and 2021, we had $200 million and $400 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.

 

Shelf Registration Statement and Significant New Borrowings – 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 Company’s current three-year shelf registration filed on February 10, 2021. This reauthorization replaces the original Board authorization, which had $2.5 billion in remaining authority. 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 2022, we issued the following unsecured, fixed-rate debt securities under our shelf registration:

 

Date

Description of Securities

February 14, 2022

$1.25 billion of 2.800% Notes due February 14, 2032

 $0.50 billion of 3.375% Notes due February 14, 2042
 

$1.25 billion of 3.500% Notes due February 14, 2053

 

$0.50 billion of 3.850% Notes due February 14, 2072

September 9, 2022

$0.90 billion of 4.500% Notes due January 20, 2033

 $0.60 billion of 4.950% Notes due September 9, 2052
 

$0.40 billion of 5.150% Notes due January 20, 2063

 

The net proceeds of the 4.950% Notes due September 9, 2052, will be used to finance or refinance, in whole or in part, new or existing eligible projects with environmental benefits. We used the net proceeds from all other offerings listed for general corporate purposes, including the repurchase of common stock pursuant to our share repurchase programs. All debt securities listed include change-of-control provisions. At December 31, 2022, we had remaining authority to issue up to $6.6 billion of debt securities under our shelf registration.

 

Receivables Securitization Facility – As of December 31, 2022 and 2021, we recorded $100 million and $300 million, respectively, of borrowings under our Receivables Facility, as secured debt. (See further discussion of our receivables securitization facility in Note 10.)