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Debt

12 Months Ended

Dec. 31, 2011

Note 4—Debt

Debt consisted of the following (in millions):

	December 31,			December 31,
	2011			2010
SHORT-TERM DEBT
Credit Facilities (1):
Senior secured hedged inventory facility bearing a weighted-average interest rate of 1.5% and 2.1% at December 31, 2011 and December 31, 2010, respectively	$	75		$	500
PAA senior unsecured revolving credit facility, bearing a weighted-average interest rate of 1.6% and 0.7% at December 31, 2011 and December 31, 2010, respectively (2)	32			824
PNG senior unsecured revolving credit facility, bearing a weighted-average interest rate of 2.1% and 3.2% at December 31, 2011 and December 31, 2010, respectively (3)	68			—
4.25% senior notes due September 2012 (4)	500			—
Other	4			2
Total short-term debt	679			1,326

LONG-TERM DEBT
Senior Notes:
4.25% senior notes due September 2012 (4)	—			500
7.75% senior notes due October 2012	—			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	600			—
6.70% senior notes due May 2036	250			250
6.65% senior notes due January 2037	600			600
Unamortized discounts	(13		)	(12		)
Senior notes, net of unamortized discounts	4,262			4,363
Credit Facilities and Other:
PNG senior unsecured revolving credit facility, bearing a weighted-average interest rate of 2.1% and 3.2% at December 31, 2011 and December 31, 2010, respectively (3)	54			260
PNG GO Zone term loans, bearing a weighted-average interest rate of 1.5% at December 31, 2011	200			—
Other	4			8
Total long-term debt (2)	4,520			4,631
Total debt (5)	$	5,199		$	5,957

(1) During August 2011, we renewed, extended or refinanced our principal bank credit facilities, including PNG’s credit facility. See “Credit Facilities” below for further discussion.

(2) We classify as short-term certain borrowings under our PAA senior unsecured revolving credit facility. These borrowings are primarily 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.

(3) PNG classifies as short-term debt any borrowings under the PNG senior unsecured revolving credit facility that have been designated as working capital borrowings and must be repaid within one year. Such borrowings are primarily related to a portion of PNG’s hedged natural gas inventory.

(4) Our $500 million 4.25% senior notes will mature in September 2012 and thus are classified as short-term at December 31, 2011. The proceeds from the the issuance of these notes are being used to supplement capital available from our hedged inventory facility to fund working capital needs associated with base levels of routine waterborne cargos and for seasonal LPG inventory requirements. At December 31, 2010, approximately $466 million had been used to fund hedged inventory and would have been classified as short-term debt if funded on our credit facilities. After the $500 million 4.25% senior notes mature, we intend to use our recently renewed and expanded credit facilities to finance hedged inventory. Concurrent with the issuance of these senior notes, we entered into interest rate swaps whereby we receive fixed payments at 4.25% and pay three-month LIBOR plus a spread. See Note 6 for further discussion of our interest rate swaps.

(5) Our fixed-rate senior notes have a face value of approximately $4.8 billion and $4.4 billion as of December 31, 2011 and December 31, 2010, respectively. We estimate the aggregate fair value of these notes as of December 31, 2011 and December 31, 2010 to be approximately $5.4 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 and agreements approximates fair value as interest rates reflect current market rates.

Credit Facilities

PAA senior unsecured 364-day revolving credit agreement. In December 2011, we entered into a 364-day credit facility agreement with a borrowing capacity of $1.2 billion. As of December 31, 2011, this facility had not been activated. Pursuant to its terms, PAA may activate the facility at any time over a six-month period, resulting in a maturity 364 days from the activation date. Borrowings accrue interest based, at our election, on either the Eurocurrency Rate or the Base Rate, in each case plus a margin based on our credit rating at the applicable time.

During August 2011, we renewed, extended or refinanced our principal bank credit facilities, as discussed further below. In connection with these transactions, we terminated a $500 million, 364-day senior unsecured credit facility that was scheduled to expire in January 2012.

PAA senior unsecured revolving credit facility. In August 2011, we entered into an unsecured revolving credit agreement with a committed borrowing capacity of $1.6 billion (including a $600 million Canadian sub-facility) which contains an accordion feature that enables us to increase the committed capacity to $2.1 billion, subject to obtaining additional or increased lender commitments. The credit agreement provides for the issuance of letters of credit and has a maturity date in August 2016. Borrowings accrue interest based, at our election, on the Eurocurrency Rate, the Base Rate or the Canadian Prime Rate, in each case plus a margin based on our credit rating at the applicable time. This facility replaced a similar $1.6 billion senior unsecured revolving credit facility that was scheduled to mature in July 2012. Amounts outstanding were approximately $32 million at December 31, 2011 under this facility and approximately $824 million at December 31, 2010 under our previous revolving credit facility.

Senior secured hedged inventory facility. In August 2011, we replaced our previous $500 million senior secured hedged inventory facility that was scheduled to mature in October 2011 with a new $850 million senior secured hedged inventory facility (of which $250 million is available for the issuance of letters of credit) that expires in August 2013. Initial proceeds from the facility were used to refinance the outstanding balance of the previous facility, and subsequent proceeds from this facility will be used to finance purchased or stored hedged inventory. Subject to obtaining additional or increased lender commitments, the committed amount of this new facility may be increased to $1.35 billion. Obligations under the new committed facility are secured by the financed inventory and the associated accounts receivable and will be repaid from the proceeds of the sale of the financed inventory. Borrowings accrue interest based, at our election, on either the Eurocurrency Rate or the Base Rate, in each case plus a margin based on our credit rating at the applicable time. Amounts outstanding were approximately $75 million at December 31, 2011 under this facility and approximately $500 million at December 31, 2010 under our previous hedged inventory facility.

PNG senior unsecured credit agreement. In August 2011, PNG entered into a new $450 million, five-year senior unsecured credit agreement, which provides for (i) $250 million under a revolving credit facility, which may be increased at PNG’s option to $450 million (subject to receipt of additional or increased lender commitments) and (ii) two $100 million term loan facilities (the “GO Zone term loans”) pursuant to the purchase, at par, of the GO Bonds acquired by PNG in conjunction with the Southern Pines Acquisition (see Note 3). The revolving credit facility expires in August 2016, and the purchasers of the two GO Zone term loans have the right to put, at par, to PNG the GO Zone term loans in August 2016. The GO Bonds mature by their terms in May 2032 and August 2035, respectively. Borrowings under the revolving credit facility accrue interest, at PNG’s election, on either the Eurodollar Rate or the Base Rate, in each case plus an applicable margin. The GO Zone term loans accrue interest in accordance with the interest payable on the related GO Bonds purchased with respect thereto as provided in such GO Bonds and the GO Bonds Indenture pursuant to which such GO Bonds are issued and governed. This new PNG facility replaced a $400 million, three year senior unsecured revolving credit facility that was scheduled to mature in May 2013. Amounts outstanding were approximately $322 million at December 31, 2011 under the PNG credit agreement and approximately $260 million at December 31, 2010 under PNG’s previous revolving credit facility.

Senior Note Issuances

In January 2011, we completed the issuance of $600 million of 5.00% senior notes due February 1, 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 reduce outstanding borrowings under our credit facilities and for general partnership purposes.

In July 2010, we completed the issuance of $400 million of 3.95% senior notes due September 15, 2015. The senior notes were sold at 99.889% of face value. Interest payments are due on March 15 and September 15 of each year, which began on September 15, 2010. We used the net proceeds from this offering to repay outstanding indebtedness under our credit facilities.

Our senior notes are co-issued, jointly and severally, by Plains All American Pipeline, L.P. and a 100%-owned consolidated finance subsidiary (neither of which have independent assets or operations). In August 2011, as permitted under the indentures governing the senior notes, PAA released the guarantees of each subsidiary guarantor in conjunction with the refinancing of our credit facilities. As such, our senior notes are no longer guaranteed by any of our subsidiaries.

Senior Note Repayments and Redemptions

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 consolidated statement of operations. We utilized cash on hand and available capacity under our credit facilities to redeem these notes.

On September 15, 2010, our $175 million, 6.25% senior notes due 2015 were redeemed in full. In conjunction with the early redemption, we recognized a loss of approximately $6 million. We utilized cash on hand and available capacity under our credit facilities to redeem these notes.

Maturities

The weighted average life of our long-term debt outstanding at December 31, 2011 was approximately 10 years and the aggregate maturities for the next five years and thereafter are as follows (in millions):

Calendar Year	Payment
2012 (1)	$	—
2013	250
2014	—
2015	550
2016	429
Thereafter	3,300
Total (2)	$	4,529

(1) Our $500 million 4.25% senior notes will mature in September 2012 and thus are classified as short-term at December 31, 2011.

(2) Excludes aggregate unamortized net discount of $13 million and other long-term obligations of $4 million.

Covenants and Compliance

Our credit agreements and the indentures governing the senior notes contain cross-default provisions. Our credit agreements prohibit declaration or payments of distributions on, or purchases or redemptions of, units if any default or event of default is continuing. In addition, the agreements contain various covenants limiting our ability to, among other things:

· grant liens on certain property;

· incur indebtedness, including capital leases;

· sell substantially all of our assets or enter into a merger or consolidation;

· engage in certain transactions with affiliates; and

· enter into certain burdensome agreements.

The PAA senior unsecured revolving credit facility, the senior secured hedged inventory facility and the PAA senior unsecured 364-day revolving credit facility treat a change of control as an event of default and also require us to maintain a debt-to-EBITDA coverage ratio that will not be greater than 5.00 to 1.00 or 5.50 to 1.00 on all outstanding debt during an acquisition period (generally, the period consisting of three fiscal quarters following an acquisition greater than $150 million).

For covenant compliance purposes, letters of credit and borrowings to fund hedged inventory and margin requirements are excluded when calculating the debt coverage ratio.

A default under our credit facilities would permit the lenders to accelerate the maturity of the outstanding debt. As long as we are in compliance with our credit agreements, our ability to make distributions of available cash is not restricted. As of December 31, 2011, we were in compliance with the covenants contained in our credit agreements and indentures.

PNG’s credit agreement contains covenants and events of default provisions that are substantially consistent with those contained in PNG’s previous credit facility. This new agreement restricts, among other things, PNG’s ability to make distributions of available cash to unitholders if any default or event of default, as defined in the credit agreement, exists or would result therefrom. In addition, the credit agreement contains restrictive covenants, including those that restrict PNG’s ability to grant liens, incur additional indebtedness, engage in certain transactions with affiliates, engage in substantially unrelated businesses, sell substantially all of its assets or enter into a merger or consolidation, and enter into certain burdensome agreements. In addition, the credit agreement contains certain financial covenants which, among other things, require PNG to maintain a debt-to-EBITDA coverage ratio that will not be greater than 5.00 to 1.00 on outstanding debt (5.50 to 1.00 during an acquisition period) and also require that PNG maintain an EBITDA-to-interest coverage ratio that will not be less than 3.00 to 1.00, as such terms are defined in the credit agreement.

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. These letters of credit are issued under our PAA senior unsecured revolving credit facility, our senior secured hedged inventory facility and PNG’s senior unsecured revolving credit facility, and our liabilities with respect to these purchase obligations are recorded in accounts payable on our balance sheet in the month the crude oil is purchased. Generally, these letters of credit are issued for periods of up to seventy days and are terminated upon completion of each transaction. At December 31, 2011 and 2010, we had outstanding letters of credit of approximately $33 million and $75 million, respectively.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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