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Debt

6 Months Ended

Jun. 30, 2011

Debt

Note 7—Debt

Debt consisted of the following (in millions):

		June 30,			December 31,
		2011			2010
SHORT-TERM DEBT
Credit Facilities:
Senior secured hedged inventory facility bearing a weighted-average interest rate of 2.1% for both periods presented		$	300		$	500
PAA senior unsecured revolving credit facility, bearing a weighted-average interest rate of 1.1% and 0.7% at June 30, 2011 and December 31, 2010, respectively (1)		234			824
Other		2			2
Total short-term debt		536			1,326

LONG-TERM DEBT
Senior Notes:
4.25% senior notes due September 2012 (2)		500			500
7.75% senior notes due October 2012 (3)		—			200
5.63% senior notes due December 2013		250			250
5.25% senior notes due June 2015		150			150
3.95% senior notes due September 2015		400			400
5.88% senior notes due August 2016		175			175
6.13% senior notes due January 2017		400			400
6.50% senior notes due May 2018		600			600
8.75% senior notes due May 2019		350			350
5.75% senior notes due January 2020		500			500
5.00% senior notes due February 2021 (4)		600			—
6.70% senior notes due May 2036		250			250
6.65% senior notes due January 2037		600			600
Unamortized discounts		(14		)	(12		)
Senior notes, net of unamortized discounts		4,761			4,363
Credit Facilities and Other:
PNG senior unsecured revolving credit facility, bearing a weighted-average interest rate of 2.9% and 3.2% at June 30, 2011 and December 31, 2010, respectively		226			260
Other		8			8
Total long-term debt (1)		4,995			4,631
Total debt (5)		$	5,531		$	5,957

(1) We classify as short-term any borrowings under our PAA senior unsecured revolving credit facility. These borrowings are designated as working capital borrowings, must be repaid within one year and are primarily for hedged LPG and crude oil inventory and NYMEX and ICE margin deposits.

(2) The proceeds from these notes are being used to supplement capital available from our hedged inventory facility. At June 30, 2011 and December 31, 2010, approximately $500 million and $466 million, respectively, had been used to fund hedged inventory and would be classified as short-term debt if funded on our credit facilities.

(3) On February 7, 2011, our $200 million, 7.75% senior notes due 2012 were redeemed in full. In conjunction with the early redemption, we recognized a loss of approximately $23 million, recorded to Other income/(expense), net in our condensed consolidated statement of operations. We utilized cash on hand and available capacity under our credit facilities to redeem these notes.

(4) In January 2011, we completed the issuance of $600 million, 5.00% senior notes due 2021. The senior notes were sold at 99.521% of face value. Interest payments are due on February 1 and August 1 of each year, beginning on August 1, 2011. We used the net proceeds from this offering to repay outstanding indebtedness under our credit facilities and for general partnership purposes.

(5) Our fixed-rate senior notes have a face value of approximately $4.8 billion and $4.4 billion as of June 30, 2011 and December 31, 2010, respectively. We estimate the aggregate fair value of these notes as of June 30, 2011 and December 31, 2010 to be approximately $5.2 billion and $4.7 billion, respectively. Our fixed-rate senior notes are traded among institutions, which trades are routinely published by a reporting service. Our determination of fair value is based on reported trading activity near quarter end. We estimate that the carrying value of outstanding borrowings under our credit facilities approximates fair value as interest rates reflect current market rates.

PAA 364-Day Credit Facility

In January 2011, we entered into a 364-day senior unsecured credit facility with an aggregate borrowing capacity of $500 million. This credit facility has a maximum debt-to-EBITDA coverage ratio of 4.75 to 1.00 (5.50 to 1.00 during an acquisition period) and matures at the earlier of January 2012 or the refinancing of our PAA senior unsecured revolving credit facility. As set forth in the agreement, borrowings under this facility bear interest at our election at either LIBOR plus an applicable margin (based on the credit rating of our long-term senior unsecured debt), or a base rate. Commitment fees are payable at rates between 0.15% and 0.40%, also determined based on the credit rating of our long-term senior unsecured debt. Borrowings may be used for any partnership purpose. There were no outstanding borrowings under this facility at June 30, 2011.

Letters of Credit

In connection with our crude oil supply and logistics activities, we provide certain suppliers with irrevocable standby letters of credit to secure our obligation for the purchase of crude oil. At June 30, 2011 and December 31, 2010, we had outstanding letters of credit of approximately $95 million and $75 million, respectively.