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,
	2015				2014
	Amount		Weighted-		Amount		Weighted-
	Outstanding		Average Rate		Outstanding		Average Rate
	(in millions)				(in millions)

Commercial paper	$	–		0.0%	$	1,101		0.4%
Bank loans		236		9.5%		204		8.8%

Total short-term borrowings	$	236			$	1,305

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 working capital needs, and to support our commercial paper program. Our $4.5 billion multi-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, 2015, we complied with the covenant as our shareholders’ equity as defined by the covenant was $38.0 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, 2015, 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 $1.9 billion at December 31, 2015 and $2.1 billion at December 31, 2014. Borrowings on these lines amounted to $236 million at December 31, 2015 and $204 million at December 31, 2014.

Long-Term Debt:

Our long-term debt consisted of (interest rates are as of December 31, 2015):


	As of December 31,
	2015			2014
	(in millions)

U.S. dollar notes, 0.37% to 7.00% (weighted-average effective rate 4.75%), due through 2040	$	8,371		$	10,836
Euro notes, 1.08% to 2.55% (weighted-average effective rate 1.97%), due through 2035		4,305			3,911
Pound sterling notes, 3.88% to 7.25% (weighted-average effective rate 4.35%), due through 2045		1,399			573
Swiss franc notes, 0.00% to 1.125% (weighted-average effective rate 0.73%), due through 2025		1,075			–
Capital leases and other obligations		12			31

Total		15,162			15,351
Less current portion of long-term debt		(605	)		(1,530	)

Long-term debt	$	14,557		$	13,821

Deferred debt issuance costs of $46 million as of December 31, 2015 and $44 million as of December 31, 2014 are netted against the related debt in the table above. As noted in Note 1, Summary of Significant Accounting Policies – New Accounting Pronouncements, these amounts were reclassified from long-term other assets to offset the related debt in the fourth quarter of 2015.

As of December 31, 2015, aggregate maturities of our debt and capital leases based on stated contractual maturities, excluding unamortized non-cash bond premiums, discounts, bank fees and mark-to-market adjustments of $(70) million, were (in millions):


2016	2017	2018	2019	2020	Thereafter	Total
$1,755	$1,481	$1,110	$1,250	$827	$8,809	$15,232

On February 9, 2016, $1,750 million of our 4.125% U.S. dollar notes matured. The notes and accrued interest to date were paid with net proceeds from the fr.400 million Swiss franc-denominated notes issuance on January 26, 2016 and the €700 million euro-denominated notes issuance on January 21, 2016, as well as cash on hand and the issuance of commercial paper. As we refinanced $1,150 million of the matured notes with long-term debt issued in January 2016, we reflected this amount within long-term debt as of December 31, 2015.

On January 26, 2016, we issued fr.400 million of Swiss franc-denominated notes, or $399 million in U.S. dollars locked in with a forward currency contract on January 12, 2016, consisting of:

•

fr.250 million (or $249 million) of 0.080% fixed rate notes that mature on January 26, 2018

•

fr.150 million (or $150 million) of 0.650% fixed rate notes that mature on July 26, 2022

We received proceeds net of premiums and deferred financing costs of $398 million that were used to partially fund the February 2016 note maturity and for other general corporate purposes. We recorded approximately $1 million of premiums and deferred financing costs, which will be amortized into interest expense over the life of the notes.

On January 21, 2016, we issued €700 million of euro-denominated 1.625% notes, or $760 million in U.S. dollars locked in with a forward currency contract on January 13, 2016, that mature on January 20, 2023. We received proceeds net of discounts and deferred financing costs of $752 million that were used to partially fund the February 2016 note maturity and for other general corporate purposes. We recorded approximately $8 million of discounts and deferred financing costs, which will be amortized into interest expense over the life of the notes.

On November 30, 2015, we completed a cash tender offer and retired £247 million of British pound sterling-denominated 7.250% notes, or approximately $372 million in U.S. dollars as of November 30, 2015, due in July 2018. We financed the repurchase of these notes, including the payment of accrued interest and other costs incurred, from net proceeds received from the £400 million British pound sterling-denominated notes issuance on November 25, 2015 described below. In connection with retiring this debt, during the three months ended December 31, 2015, we recorded a $40 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 premiums and deferred financing costs in earnings at the time of the debt extinguishment. Cash costs related to tendering the debt are included in long-term debt repayments in the consolidated statement of cash flows for the year ended December 31, 2015.

On November 25, 2015, we issued £400 million of British pound sterling-denominated 4.500% notes, or $609 million in U.S. dollars locked in with a forward currency contract on November 19, 2015, that mature on December 3, 2035. We received proceeds net of discounts and deferred financing costs of $604 million that were used to fund the November 2015 cash tender offer and for other general corporate purposes. We recorded approximately $5 million of discounts and deferred financing costs, which will be amortized into interest expense over the life of the notes.

On October 6, 2015 we issued fr.400 million of Swiss franc-denominated notes, or $410 million in U.S. dollars locked in with a forward currency contract on September 21, 2015, consisting of:

•

fr.135 million (or $138 million) of 0.625% fixed rate notes that mature on October 6, 2020

•

fr.265 million (or $272 million) of 1.125% fixed rate notes that mature on December 21, 2023

We received proceeds net of premiums and deferred financing costs of $410 million that were used for general corporate purposes and to fund upcoming debt maturities. We recorded the fr.400 million of Swiss franc-denominated notes and less than $1 million of premiums and deferred financing costs, which will be amortized into interest expense over the life of the notes.

On June 11, 2015, €400 million of our floating rate euro-denominated notes matured. The notes and accrued interest to date were paid with cash on hand and the issuance of commercial paper.

On March 30, 2015, we issued fr.675 million of Swiss franc-denominated notes, or approximately $694 million in U.S. dollars as of March 31, 2015, consisting of:

•

fr.175 million (or $180 million) of 0.000% fixed rate notes that mature on March 30, 2017

•

fr.300 million (or $308 million) of 0.625% fixed rate notes that mature on December 30, 2021

•

fr.200 million (or $206 million) of 1.125% fixed rate notes that mature on December 30, 2025

We received net proceeds of $675 million that were used for general corporate purposes. We recorded approximately $2 million of premiums and deferred financing costs, which will be amortized into interest expense over the life of the notes.

On March 20, 2015, €850 million of our 6.250% euro-denominated notes matured. The notes and accrued interest to date were paid with the issuance of commercial paper and cash on hand.

On March 20, 2015, we completed a cash tender offer and retired $2.5 billion of our long-term U.S. dollar debt consisting of:

•

$102 million of our 6.500% Notes due in August 2017

•

$115 million of our 6.125% Notes due in February 2018

•

$80 million of our 6.125% Notes due in August 2018

•

$691 million of our 5.375% Notes due in February 2020

•

$201 million of our 6.500% Notes due in November 2031

•

$26 million of our 7.000% Notes due in August 2037

•

$71 million of our 6.875% Notes due in February 2038

•

$69 million of our 6.875% Notes due in January 2039

•

$1,143 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 $2.8 billion notes issuance on March 6, 2015 described below and the issuance of commercial paper. In connection with retiring this debt, during the first three months of 2015, we recorded a $708 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. Cash costs related to tendering the debt are included in long-term debt repayments in the consolidated statement of cash flows for the year ended December 31, 2015. We also recognized $5 million of charges within interest expense from hedging instruments related to the retired debt. Upon extinguishing the debt, the deferred cash flow hedge amounts were recorded in earnings.

On March 6, 2015, we issued €2.0 billion of euro-denominated notes and £450 million of British pound sterling-denominated notes, or approximately $2.8 billion in U.S. dollars as of March 31, 2015, consisting of:

•

€500 million (or $537 million) of 1.000% fixed rate notes that mature on March 7, 2022

•

€750 million (or $805 million) of 1.625% fixed rate notes that mature on March 8, 2027

•

€750 million (or $805 million) of 2.375% fixed rate notes that mature on March 6, 2035

•

£450 million (or $667 million) of 3.875% fixed rate notes that mature on March 6, 2045

We received net proceeds of $2,890 million that were used to fund the March 2015 tender offer and for other general corporate purposes. We recorded approximately $29 million of discounts and deferred financing costs, which will be amortized into interest expense over the life of the notes.

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. Cash costs related to tending the debt are 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.

Our weighted-average interest rate on our total debt was 3.7% as of December 31, 2015, down from 4.3%, as of December 31, 2014.

Fair Value of Our Debt:

The fair value of our short-term borrowings at December 31, 2015 and 2014 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, 2015, the aggregate fair value of our total debt was $15,908 million and its carrying value was $15,398 million. At December 31, 2014, the aggregate fair value of our total debt was $18,463 million and its carrying value was $16,656 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,
	2015			2014			2013
				(in millions)

Interest expense, debt	$	609		$	778		$	1,017
Loss on debt extinguishment and related expenses		753			495			612
Coffee business transactions currency-related net gains		(436	)		(628	)		–
Loss related to interest rate swaps		34			–			–
Benefit from indemnification resolution		–			–			(49	)
Other expense / (income), net		53			43			(1	)

Interest and other expense, net	$	1,013		$	688		$	1,579

See Note 2, Divestitures and Acquisitions, and Note 9, Financial Instruments, for information on the currency exchange forward contracts associated with the coffee business transactions. Also see Note 9, Financial Instruments, for information on the loss related to U.S. dollar interest rate swaps no longer designated as accounting cash flow hedges during the first quarter of 2015 and the first quarter of 2016. See Note 13, Commitments and Contingencies, for information on the benefit from the resolution of the Cadbury acquisition-related indemnification.