LONG-TERM DEBT

12 Months Ended

Dec. 31, 2020

Long-term Debt, Unclassified [Abstract]

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


	As of December 31,
	2020				2019
	Carrying Value		Fair Value(5)		Carrying Value		Fair Value(5)
4.60% senior notes due 2045(1)	$	1,000	$	1,343	$	1,000	$	1,194
3.75% senior notes due 2046(1)	400		479		400		416
4.20% senior notes due 2047(1)	400		514		400		449
1.85% senior notes due 2025(2)	500		526		—		—
British pound term loan(3)	—		—		170		170
Euro term loan(3)	—		—		123		123
Japanese Yen term loan(4)	87		87		—		—
Canadian dollar revolving credit facility(3)	—		—		46		46
Other	34		34		42		42
Subtotal	2,421		2,983		2,181		2,440
Less current maturities	(8)		(8)		(246)		(246)
Debt issuance costs and discounts, net of amortization	(24)		(24)		(21)		(21)
Long-term debt (less current maturities)	$	2,389	$	2,951	$	1,914	$	2,173

(1) In the years 2015-2017, Grainger issued $1.8 billion in long-term debt (Senior Notes) to partially fund the repurchase of $2.8 billion in shares of the total $3 billion previously announced. The remaining share repurchases were funded from internally generated cash. Debt was issued as follows:

•In May 2017, $400 million payable in 30 years and carries a 4.20% interest rate, payable semiannually.

•In May 2016, $400 million payable in 30 years and carries a 3.75% interest rate, payable semiannually.

•In June 2015, $1 billion payable in 30 years and carries a 4.60% interest rate, payable semiannually.

The Company may redeem the Senior Notes in whole at any time or in part from time to time at a “make-whole” redemption price prior to their respective maturity dates. The 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 Senior Notes plus 20-25 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 Senior Notes at 101% of their principal amount plus accrued and unpaid interest, if any, at the date of purchase. Within one year of the maturity date, the Company may redeem the Senior Notes in whole at any time or in part at 100% of their principal amount, together with accrued and unpaid interest, if any, to the redemption date. Costs and discounts of approximately $24 million associated with the issuance of the Senior 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 over the term of the Senior Notes.

(2) 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. 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. 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 13 to the Financial Statements for further discussion of these derivative instruments and the Company's hedge accounting policies.

(3) In February 2020, the Company repaid the British pound term loan, Euro term loan and the Canadian dollar revolving credit facility with the proceeds of the 1.85% Senior Notes.

(4) 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. 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%.

(5) 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.

The scheduled aggregate principal payments related to long-term debt, excluding debt issuance costs and the impact of derivatives, are due as follows (in millions of dollars):


Year	Payment Amount
2021	$	8
2022	—
2023	43
2024	44
2025	500
Thereafter	1,805
Total	$	2,400

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 December 31, 2020.