Note 8. Debt and Borrowing Arrangements

Short-Term Borrowings:

Our short-term borrowings and related weighted-average interest rates consisted of:


	As of December 31,
	2014				2013
	Amount		Weighted-		Amount		Weighted-
	Outstanding		Average Rate		Outstanding		Average Rate
	(in millions)				(in millions)

Commercial paper	$	1,101		0.4%	$	1,410		0.4%
Bank loans		204		8.8%		184		7.7%

Total short-term borrowings	$	1,305			$	1,594

As of December 31, 2014, the commercial paper issued and outstanding had between 2 and 86 days remaining to maturity. Bank loans include borrowings on primarily uncommitted credit lines maintained by some of our international subsidiaries to meet short-term working capital needs.

Borrowing Arrangements:

We maintain a revolving credit facility for general corporate purposes, including for working capital purposes and to support our commercial paper program. Our $4.5 billion five-year senior unsecured revolving credit facility expires on October 11, 2018. The revolving credit agreement includes a covenant that we maintain a minimum shareholders’ equity of at least $24.6 billion, excluding accumulated other comprehensive earnings / (losses) and the cumulative effects of any changes in accounting principles. At December 31, 2014, we met the covenant as our shareholders’ equity as defined by the covenant was $35.1 billion. The revolving credit facility agreement also contains customary representations, covenants and events of default. There are no credit rating triggers, provisions or other financial covenants that could require us to post collateral as security. As of December 31, 2014, no amounts were drawn on the facility.

Some of our international subsidiaries maintain primarily uncommitted credit lines to meet short-term working capital needs. Collectively, these credit lines amounted to $2.1 billion at December 31, 2014 and $2.4 billion at December 31, 2013. Borrowings on these lines amounted to $204 million at December 31, 2014 and $184 million at December 31, 2013.

Long-Term Debt:

Our long-term debt consisted of (interest rates are as of December 31, 2014):


	As of December 31,
	2014			2013
	(in millions)

U.S. dollar notes, 0.76% to 7.00% (weighted-average effective rate 5.13%), due through 2040	$	10,873		$	9,907
Euro notes, 0.58% to 6.25% (weighted-average effective rate 3.03%), due through 2021		3,918			4,448
Pound sterling notes, 7.25% (weighted-average effective rate 5.44%), due through 2018		573			1,116
Capital leases and other obligations		31			14

Total		15,395			15,485
Less current portion of long-term debt		(1,530	)		(1,003	)

Long-term debt	$	13,865		$	14,482

As of December 31, 2014, aggregate maturities of our debt based on stated contractual maturities were (in millions):


2015	2016	2017	2018	2019	Thereafter	Total
$1,530	$1,763	$1,498	$1,697	$1,250	$7,667	$15,405

On December 11, 2014, £300 million of our 5.375% British pound sterling bonds matured. The bonds and accrued interest to date were paid with cash on hand and the issuance of commercial paper.

On February 19, 2014, $500 million of our 6.75% U.S. dollar notes matured. The notes and accrued interest to date were paid with cash on hand and the issuance of commercial paper.

On February 6, 2014, we completed a cash tender offer and retired $1.56 billion of our long-term U.S. dollar debt consisting of:

•

$393 million of our 7.000% Notes due in August 2037

•

$382 million of our 6.875% Notes due in February 2038

•

$250 million of our 6.875% Notes due in January 2039

•

$535 million of our 6.500% Notes due in February 2040

We financed the repurchase of these notes, including the payment of accrued interest and other costs incurred, from net proceeds received from the $3.0 billion notes issuance on January 16, 2014. In connection with retiring this debt, during the first six months of 2014, we recorded a $493 million loss on extinguishment of debt within interest expense related to the amount we paid to retire the debt in excess of its carrying value and from recognizing unamortized discounts and deferred financing costs in earnings at the time of the debt extinguishment. The loss on extinguishment is included in long-term debt repayments in the 2014 consolidated statement of cash flows. We also recognized $2 million in interest expense related to interest rate cash flow hedges that were deferred in accumulated other comprehensive losses and recognized into earnings over the life of the debt. Upon extinguishing the debt, the deferred cash flow hedge amounts were recorded in earnings.

On January 16, 2014, we issued $3.0 billion of U.S. dollar notes, consisting of:

•

$400 million of floating rate notes that bear interest at three-month LIBOR plus 0.52% and mature on February 1, 2019

•

$850 million of 2.250% fixed rate notes that mature on February 1, 2019

•

$1,750 million of 4.000% fixed rate notes that mature on February 1, 2024

We received net proceeds of $2,982 million that were used to fund the February 2014 tender offer, pay down commercial paper borrowings and for other general corporate purposes. We recorded approximately $18 million of discounts and deferred financing costs, which will be amortized into interest expense over the life of the notes.

On December 18, 2013, we completed a cash tender offer and retired $3.4 billion of our long-term U.S. dollar debt consisting of:

•

$910 million of our 6.500% Notes due in August 2017

•

$729 million of our 6.125% Notes due in February 2018

•

$334 million of our 6.125% Notes due in August 2018

•

$1,467 million of our 5.375% Notes due in February 2020

We financed the repurchase of these notes, including the payment of accrued interest and other costs, with net proceeds received from the €2.4 billion notes issuance on December 11, 2013, cash on hand and commercial paper issuances. We recorded a $608 million loss on extinguishment of debt within interest expense related to the amount we paid to retire the debt in excess of its carrying value and from recognizing unamortized discounts and deferred financing costs in earnings at the time of the debt extinguishment. The loss on extinguishment is included in long-term debt repayments in the 2013 consolidated statement of cash flows. We also recognized $4 million in interest expense related to interest rate cash flow hedges that were deferred in accumulated other comprehensive losses and recognized into earnings over the life of the debt. Upon extinguishing the debt, the deferred cash flow hedge amounts were recorded in earnings.

On December 11, 2013, we issued €2.4 billion of Euro notes, or approximately $3.3 billion in U.S. dollars as of December 31, 2013, consisting of:

•

€400 million (or $550 million) of floating rate notes that bear interest at three-month EURIBOR plus 0.50% and mature on June 11, 2015

•

€750 million (or $1,031 million) of 1.125% fixed rate notes that mature on January 26, 2017

•

€1,250 million (or $1,718 million) of 2.375% fixed rate notes that mature on January 26, 2021

We received net proceeds of €2,381 million, or $3,239 million in U.S. dollars, on December 11, 2013, that were used to partially fund the December 2013 tender offer. We also recorded approximately $27 million of discounts and deferred financing costs, which will be amortized into interest expense over the life of the notes.

On October 1, 2013, $1 billion of our 5.125% U.S. dollar notes and $800 million of our 5.250% U.S. dollar notes matured. The notes and accrued interest to date were paid with cash on hand and the issuance of commercial paper.

On May 8, 2013, $1 billion of our 2.625% U.S. dollar notes matured. The notes and accrued interest to date were paid with cash on hand and the issuance of commercial paper.

On February 11, 2013, $750 million of our 6.00% U.S. dollar notes matured. The notes and accrued interest to date were paid with cash on hand.

Our weighted-average interest rate on our total debt was 4.3% as of December 31, 2014, down from 4.8% as of December 31, 2013.

Fair Value of Our Debt:

The fair value of our short-term borrowings at December 31, 2014 and 2013 reflects current market interest rates and approximates the amounts we have recorded on our consolidated balance sheet. The fair value of our long-term debt was determined using quoted prices in active markets (Level 1 valuation data) for the publicly traded debt obligations. At December 31, 2014, the aggregate fair value of our total debt was $18,463 million and its carrying value was $16,700 million. At December 31, 2013, the aggregate fair value of our total debt was $18,807 million and its carrying value was $17,079 million.

Interest and Other Expense, Net:

Interest and other expense, net within our results of continuing operations consisted of:


	For the Years Ended December 31,
	2014			2013			2012
				(in millions)

Interest expense, debt	$	778		$	1,017		$	1,177
Loss on debt extinguishment and related expenses		495			612			–
Unrealized gain on planned coffee business transactions currency hedge		(628	)		–			–
Benefit from indemnification resolution		–			(49	)		–
Spin-Off-related financing fees		–			–			609
Other expense / (income), net		43			(1	)		77

Total interest and other expense, net	$	688		$	1,579		$	1,863

See Note 2, Divestitures and Acquisitions, and Note 9, Financial Instruments, for information on the currency exchange forward contracts associated with the planned coffee business transactions. See Note 11, Commitments and Contingencies, for information on the benefit from the resolution of the Cadbury acquisition-related indemnification. See Note 9, Financial Instruments, on the Spin-Off related financing fees of $556 million related to several interest rate swap settlements in 2012.