Note 16: Borrowings
Short-Term Debt
As of December 28, 2013, short-term debt consisted of drafts payable of $257 million and notes payable of $24 million (drafts payable of $264 million and notes payable of $48 million as of December 29, 2012). We have an ongoing authorization from our Board of Directors to borrow up to $3.0 billion, including through the issuance of commercial paper. Maximum borrowings under our commercial paper program during 2013 were $300 million ($500 million during 2012). Our commercial paper was rated A-1+ by Standard & Poor’s and P-1 by Moody’s as of December 28, 2013.
Long-Term Debt
Our long-term debt at the end of each period was as follows: |
| | | | | | | | |
(In Millions) | | Dec 28,
2013 | | Dec 29,
2012 |
2012 Senior notes due 2017 at 1.35% | | $ | 2,997 |
| | $ | 2,997 |
|
2012 Senior notes due 2022 at 2.70% | | 1,494 |
| | 1,494 |
|
2012 Senior notes due 2032 at 4.00% | | 744 |
| | 743 |
|
2012 Senior notes due 2042 at 4.25% | | 924 |
| | 924 |
|
2011 Senior notes due 2016 at 1.95% | | 1,499 |
| | 1,498 |
|
2011 Senior notes due 2021 at 3.30% | | 1,996 |
| | 1,996 |
|
2011 Senior notes due 2041 at 4.80% | | 1,490 |
| | 1,489 |
|
2009 Junior subordinated convertible debentures due 2039 at 3.25% | | 1,075 |
| | 1,063 |
|
2005 Junior subordinated convertible debentures due 2035 at 2.95% | | 946 |
| | 932 |
|
Total long-term debt | | $ | 13,165 |
| | $ | 13,136 |
|
Senior Notes
In the fourth quarter of 2012, we issued $6.2 billion aggregate principal amount of senior unsecured notes for general corporate purposes and to repurchase shares of our common stock pursuant to our authorized common stock repurchase program. In the third quarter of 2011, we issued $5.0 billion aggregate principal amount of senior unsecured notes, primarily to repurchase shares of our common stock pursuant to our authorized common stock repurchase program, and for general corporate purposes.
Our senior notes pay a fixed rate of interest semiannually. We may redeem our senior notes, in whole or in part, at any time at our option at specified redemption prices. The senior notes rank equally in right of payment with all of our other existing and future senior unsecured indebtedness and will effectively rank junior to all liabilities of our subsidiaries.
Convertible Debentures
In 2009, we issued $2.0 billion of junior subordinated convertible debentures (the 2009 debentures). In 2005, we issued $1.6 billion of junior subordinated convertible debentures (the 2005 debentures). Both the 2009 and 2005 debentures pay a fixed rate of interest semiannually.
|
| | | | | | |
| | 2009 Debentures | | 2005 Debentures |
Annual coupon interest rate | | 3.25 | % | | 2.95 | % |
Annual effective interest rate | | 7.20 | % | | 6.45 | % |
Maximum amount of contingent interest that will accrue per year | | 0.50 | % | | 0.40 | % |
The effective interest rate is based on the rate for a similar instrument that does not have a conversion feature.
Both the 2009 and 2005 debentures have a contingent interest component that requires us to pay interest based on certain thresholds or for certain events, commencing on August 1, 2019 for the 2009 debentures. As of December 28, 2013, we have not met any of the thresholds or events related to the 2005 debentures. The fair values of the related embedded derivatives were $10 million and $9 million as of December 28, 2013, for the 2009 and 2005 debentures, respectively ($6 million and zero as of December 29, 2012 for the 2009 and 2005 debentures, respectively).
Both the 2009 and 2005 debentures are convertible, subject to certain conditions, into shares of our common stock. Holders can surrender the 2009 debentures for conversion if the closing price of Intel common stock has been at least 130% of the conversion price then in effect for at least 20 trading days during the 30 consecutive trading-day period ending on the last trading day of the preceding fiscal quarter. Holders can surrender the 2005 debentures for conversion at any time. We will settle any conversion or repurchase of the 2009 debentures in cash up to the face value, and any amount in excess of face value will be settled in cash or stock at our option. However, we can settle any conversion or repurchase of the 2005 debentures in cash or stock at our option. On or after August 5, 2019, we can redeem, for cash, all or part of the 2009 debentures for the principal amount, plus any accrued and unpaid interest, if the closing price of Intel common stock has been at least 150% of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading-day period prior to the date on which we provide notice of redemption. We can redeem, for cash, all or part of the 2005 debentures for the principal amount, plus any accrued and unpaid interest, if the closing price of Intel common stock has been at least 130% of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading-day period prior to the date on which we provide notice of redemption. If certain events occur in the future, the indentures governing the 2009 and 2005 debentures provide that each holder of the debentures can, for a pre-defined period of time, require us to repurchase the holder’s debentures for the principal amount plus any accrued and unpaid interest. Both the 2009 and 2005 debentures are subordinated in right of payment to any existing and future senior debt and to the other liabilities of our subsidiaries. We have concluded that both the 2009 and 2005 debentures are not conventional convertible debt instruments and that the embedded stock conversion options qualify as derivatives. In addition, we have concluded that the embedded conversion options would be classified in stockholders’ equity if they were freestanding derivative instruments. As such, the embedded conversion options are not accounted for separately as derivatives. |
| | | | | | | | | | | | | | | | |
| | 2009 Debentures | | 2005 Debentures |
(In Millions, Except Per Share Amounts) | | Dec 28,
2013 | | Dec 29,
2012 | | Dec 28,
2013 | | Dec 29,
2012 |
Outstanding principal | | $ | 2,000 |
| | $ | 2,000 |
| | $ | 1,600 |
| | $ | 1,600 |
|
Equity component carrying amount | | $ | 613 |
| | $ | 613 |
| | $ | 466 |
| | $ | 466 |
|
Unamortized discount | | $ | 910 |
| | $ | 922 |
| | $ | 643 |
| | $ | 656 |
|
Net debt carrying amount | | $ | 1,075 |
| | $ | 1,063 |
| | $ | 946 |
| | $ | 932 |
|
Conversion rate (shares of common stock per $1,000 principal amount of debentures) | | 45.57 |
| | 45.05 |
| | 34.60 |
| | 33.86 |
|
Effective conversion price (per share of common stock) | | $ | 21.94 |
| | $ | 22.20 |
| | $ | 28.90 |
| | $ | 29.53 |
|
In the preceding table, the remaining amortization periods for the unamortized discounts for the 2009 and 2005 debentures are approximately 26 and 22 years, respectively, as of December 28, 2013.
The conversion rate adjusts for certain events outlined in the indentures governing the 2009 and 2005 debentures, such as quarterly dividend distributions in excess of $0.14 and $0.10 per share for the 2009 and 2005 debentures, respectively, but it does not adjust for accrued interest. In addition, the conversion rate will increase for a holder of either the 2009 or 2005 debentures who elects to convert the debentures in connection with certain share exchanges, mergers, or consolidations involving Intel.
Arizona Bonds
In 2007, we guaranteed repayment of principal and interest on bonds issued by the Industrial Development Authority of the City of Chandler, Arizona, which constituted an unsecured general obligation for Intel. The aggregate principal amount of the bonds issued in December 2007 was $125 million. The 2007 Arizona bonds were tendered and repaid in December 2012. These bonds bore interest at a fixed rate of 5.3%. In the future, we may re-market the bonds as either fixed-rate bonds for a specified period or as variable-rate bonds until their final maturity on December 1, 2037.
Debt Maturities
Our aggregate debt maturities based on outstanding principal as of December 28, 2013, by year payable, were as follows:
|
| | | | |
(In Millions) | | |
2014 | | $ | — |
|
2015 | | — |
|
2016 | | 1,500 |
|
2017 | | 3,000 |
|
2018 | | — |
|
2019 and thereafter | | 10,275 |
|
Total | | $ | 14,775 |
|
Substantially all of the difference between the total aggregate debt maturities in the preceding table and the total carrying amount of our debt is due to the unamortized discount of our convertible debentures.
