SHORT-TERM AND LONG-TERM DEBT

9 Months Ended

Sep. 30, 2020

During the nine months ended September 30, 2020, the Company entered into several financing transactions:

•In February 2020, the Company issued $500 million of unsecured 1.85% Senior Notes (1.85% Notes) and used the proceeds to repay the British pound term loan, Euro term loan and the Canadian dollar revolving credit facility, and to fund general working capital needs.

•In connection with the 1.85% Notes, in February 2020, the Company entered into derivative instrument agreements to manage its risks associated with interest rates on the 1.85% Notes and foreign currency fluctuations related to the financing of international operations. See Note 9 to the Financial Statements for further discussion of these derivative instruments and the Company's hedge accounting policies.

•In February 2020, the Company entered into a five-year unsecured credit agreement pursuant to which the Company may obtain loans in various currencies on a revolving basis in an aggregate amount not exceeding the U.S. Dollar equivalent of $1.25 billion ($1.25 billion credit facility), which may be increased from time to time up to $1.875 billion at the request of the Company, subject to approval from lenders and other customary conditions. The $1.25 billion credit facility replaced the Company's former $750 million unsecured revolving credit facility, originated in October 2017, which was scheduled to mature in October 2022.

•In March 2020, the Company received approximately $1 billion after drawing down on its $1.25 billion credit facility as a proactive measure to increase its cash position and preserve financial flexibility in light of uncertainty resulting from the COVID-19 pandemic. During the third quarter of 2020, the Company repaid its $1 billion draw down on its $1.25 billion credit facility.

•In August 2020, MonotaRO Co. LTD., the endless assortment business in Japan, entered into a ¥9 billion term loan agreement to fund technology investments and the expansion of its distribution center network.

There was no short-term debt as of September 30, 2020. Short-term debt as of December 31, 2019 consisted of outstanding lines of credit of $55 million.

Long-term debt, including current maturities and debt issuance costs and discounts, net, consisted of the following (in millions of dollars):


	As of September 30, 2020						As of December 31, 2019
	Carrying Value		Fair Value (3)		Carrying Value		Fair Value (3)
4.60% senior notes due 2045	$	1,000	$	1,287	$	1,000	$	1,194
3.75% senior notes due 2046	400		456		400		416
4.20% senior notes due 2047	400		489		400		449
1.85% senior notes due 2025 (1)	500		524		—		—

British pound term loan	—		—		170		170
Euro term loan	—		—		123		123
Japanese Yen term loan (2)	85		85		—		—
Canadian dollar revolving credit facility	—		—		46		46
Other	40		40		42		42
Subtotal (4)	2,425		2,881		2,181		2,440
Less: Current maturities	(12)		(12)		(246)		(246)
Debt issuance costs and discounts, net of amortization	(25)		(25)		(21)		(21)
Long-term debt (less current maturities)	$	2,388	$	2,844	$	1,914	$	2,173

(1) The 1.85% Notes mature in February 2025 and they require no principal payments until the maturity date and interest is payable semi-annually on February 15 and August 15, beginning in August 2020. Prior to January 2025, the Company may redeem the 1.85% Notes in whole at any time or in part from time to time at a “make-whole” redemption price. This redemption price is calculated by reference to the then-current yield on a U.S. treasury security with a maturity comparable to the remaining term of the 1.85% Notes plus 10 basis points, together with accrued and unpaid interest, if any, at the redemption date. Additionally, if the Company experiences specific kinds of changes in control, it will be required to make an offer to purchase the 1.85% Notes at 101% of their principal amount plus accrued and unpaid interest, if any, at the date of purchase. On or after January 15, 2025, the Company may redeem the 1.85% Notes in whole at any time or in part from time to

time at 100% of their principal amount, together with accrued and unpaid interest, if any, to the redemption date. Costs and discounts of approximately $5 million associated with the issuance of the 1.85% Notes, representing underwriting fees and other expenses, have been recorded as a contra-liability within Long-term debt and are being amortized to interest expense, net over the term of the 1.85% Notes.

(2) The Japanese Yen term loan matures in 2024, payable over four equal semi-annual principal installments in 2023 and 2024, and bears average interest at 0.05%.

(3) The estimated fair value of the Company’s senior notes was based on available external pricing data and current market rates for similar debt instruments, among other factors, which are classified as level 2 inputs within the fair value hierarchy. The carrying value of other long-term debt approximates fair value due to their variable interest rates.

(4) The Company's long-term debt instruments include affirmative and negative covenants that are usual and customary for companies with similar credit ratings and do not contain any financial performance covenants. The Company was in compliance with all debt covenants as of September 30, 2020.