Quarterly report pursuant to Section 13 or 15(d)

Long-Term Debt

v3.21.2
Long-Term Debt
 9 Months Ended
Sep. 30, 2021
Debt Disclosure [Abstract]  
Debt disclosure Long-Term Debt and Finance Lease Obligations
Long-term debt and finance lease obligations consisted of the following:
(in millions) September 30, 2021 December 31, 2020
3.5% Exchangeable Senior Debentures due 2031 $ 549  393 
4.375% Senior Secured Notes due 2023, net of original issue discount 750  750 
4.85% Senior Secured Notes due 2024, net of original issue discount 600  600 
4.45% Senior Secured Notes due 2025, net of original issue discount 599  599 
4.75% Senior Secured Notes due 2027 575  575 
4.375% Senior Secured Notes due 2028 500  500 
5.45% Senior Secured Notes due 2034, net of original issue discount 399  399 
5.95% Senior Secured Notes due 2043, net of original issue discount 300  300 
6.375% Senior Secured Notes due 2067 225  225 
6.25% Senior Secured Notes due 2068 500  500 
Finance lease obligations (note 6) 163  168 
Less debt issuance costs, net (45) (50)
Total debt and finance lease obligations 5,115  4,959 
Less current portion (567) (410)
Long-term portion of debt and finance lease obligations $ 4,548  4,549 
Exchangeable Senior Debentures
The Company has elected to account for its Motorola Solutions, Inc. 3.5% Exchangeable Senior Debentures Due 2031 (the “MSI Exchangeables”) using the fair value option. Accordingly, changes in the fair value of these instruments are recognized as (losses) gains on financial instruments in the statements of operations and in other comprehensive income as it relates to instrument specific credit risk on the consolidated statements of comprehensive income. The Company has classified for financial reporting purposes the MSI Exchangeables as a current liability as the MSI Exchangeables are exchangeable at the option of the holder at any time. Although we do not own underlying shares, the Company has entered into certain derivative transactions in order to hedge against upward price fluctuations on certain shares. Such derivative instruments are recognized in the other current assets line item in the condensed consolidated balance sheets, and are marked to fair value each reporting period. The changes in fair value are recognized in (losses) gains on financial instruments in the condensed statement of operations.

Senior Secured Notes
All of QVC's senior secured notes are secured by the capital stock of QVC and certain of its subsidiaries and have equal priority to the senior secured credit facility. The interest on QVC's senior secured notes is payable semi-annually with the exception of the 6.375% Senior Secured Notes due 2067 (the "2067 Notes") and the 6.25% Senior Secured Notes due 2068 (the "2068 Notes"), which is payable quarterly.
Senior Secured Credit Facility
On December 31, 2018, QVC entered into the Fourth Amended and Restated Credit Agreement with Zulily as borrowers (collectively, the “Borrowers”) which is a multi-currency facility that provides for a $2.95 billion revolving credit facility with a $450 million sub-limit for standby letters of credit and $1.5 billion of uncommitted incremental revolving loan commitments or incremental term loans. The Fourth Amended and Restated Credit Agreement includes a $400 million tranche that may be borrowed by the Company or Zulily with a $50 million sub-limit for standby letters of credit. The remaining $2.55 billion and any incremental loans may be borrowed only by the Company. Borrowings that are alternate base rate loans will bear interest at a per annum rate equal to the base rate plus a margin that varies between 0.25% and 0.75% depending on the Borrowers’ combined ratio of Consolidated Total Debt to Consolidated EBITDA (the “Combined Consolidated Leverage Ratio”). Borrowings that are LIBOR loans will bear interest at a per annum rate equal to the applicable LIBOR rate plus a margin that varies between 1.25% and 1.75% depending on the Borrowers’ Combined Consolidated Leverage Ratio. Each loan may be prepaid at any time and from time to time without penalty other than customary breakage costs. No mandatory prepayments will be required other than when borrowings and letter of credit usage exceed availability; provided that, if Zulily ceases to be controlled by Qurate Retail, all of its loans must be repaid and its letters of credit cash collateralized. The facility matures on December 31, 2023. Payment of loans may be accelerated following certain customary events of default.
QVC had $2.81 billion available under the terms of the Fourth Amended and Restated Credit Agreement as of September 30, 2021, including the portion available under the $400 million tranche that Zulily may also borrow on.
The payment and performance of the Borrowers’ obligations under the Fourth Amended and Restated Credit Agreement are guaranteed by each of QVC’s Material Domestic Subsidiaries (as defined in the Fourth Amended and Restated Credit Agreement). Further, the borrowings under the Fourth Amended and Restated Credit Agreement are secured, pari passu with QVC’s existing notes, by a pledge of all of QVC’s equity interests. In addition, the payment and performance of the Borrowers’ obligations with respect to the $400 million tranche available to both QVC and Zulily are also guaranteed by Zulily and secured by a pledge of all of Zulily’s equity interests.
The Fourth Amended and Restated Credit Agreement contains certain affirmative and negative covenants, including certain restrictions on the Company and Zulily and each of their respective restricted subsidiaries (subject to certain exceptions) with respect to, among other things: incurring additional indebtedness; creating liens on property or assets; making certain loans or investments; selling or disposing of assets; paying certain dividends and other restricted payments; dissolving, consolidating or merging; entering into certain transactions with affiliates; entering into sale or leaseback transactions; restricting subsidiary distributions; and limiting the Company’s consolidated leverage ratio and the Borrowers’ Combined Consolidated Leverage Ratio.
Interest Rate Swap Arrangements
In July 2019, the Company entered into a three-year interest swap arrangement with a notional amount of $125 million. The swap arrangement did not qualify as a cash flow hedge under U.S. GAAP and the fair value of the swap instrument was in a net liability position of $2 million and $3 million as of September 30, 2021 and December 31, 2020, respectively. The swap arrangement was included in accrued liabilities and other long-term liabilities as of September 30, 2021 and December 31, 2020, respectively.
Changes in the fair value of the swaps are reflected in (losses) gains on financial instruments in the condensed consolidated statements of operations.

Other Debt Related Information
QVC was in compliance with all of its debt covenants as of September 30, 2021.
The weighted average interest rate applicable to all of the outstanding debt (excluding finance leases) prior to amortization of bond discounts and related debt issuance costs was 4.9% as of September 30, 2021.