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67
Amounts related to early debt extinguishment during
the years ended December 31, 2015, 2014 and 2013
were as follows:
In millions 2015 2014 2013
Debt reductions (a) $2,151 $1,625 $ 574
Pre-tax early debt extinguishment
costs (b) 207 276 25
(a) Reductions related to notes with interest rates ranging from
2.00% to 9.38% with original maturities from 2014 to 2031 for
the years ended December 31, 2015, 2014 and 2013. Includes
the $630 million payment for a portion of the Special Purpose
Entity Liability (see Note 12 Variable Interest Entities).
(b) Amounts are included in Restructuring and other charges in
the accompanying consolidated statements of operations.
A summary of long-term debt follows:
In millions at December 31 2015 2014
8.7% note – due 2038 $ 264 $ 264
9 3/8% note – due 2019 295 420
7.95% debentures – due 2018 648 903
7.5% note – due 2021 603 979
7.3% notes – due 2039 721 721
6 7/8% notes – due 2023 – 2029 131 131
6.65% note – due 2037 44
6.4% to 7.75% debentures due 2025 –
2027 142 142
6 3/8% to 6 5/8% notes – due 2016 – 2018 185 358
6.0% notes – due 2041 585 585
5.25% to 5.3% notes – due 2015 – 2016 261 457
5.00% to 5.15% – due 2035 – 2046 1,280 —
4.8% notes - due 2044 796 796
4.75% notes – due 2022 817 896
3.65% to 3.80% notes – due 2024 – 2026 1,490 797
Floating rate notes – due 2015 – 2025 (a) 438 271
Environmental and industrial development
bonds – due 2015 – 2035 (b) 594 950
Short-term notes (c) 5424
Other (d) 67 275
Total (e) 9,326 9,373
Less: current maturities 426 742
Long-term debt $8,900 $8,631
(a) The weighted average interest rate on these notes was 2.9%
in 2015 and 2.8% in 2014.
(b) The weighted average interest rate on these bonds was 5.8%
in 2015 and 5.7% in 2014.
(c) The weighted average interest rate was 2.2% in 2015 and
2.6% in 2014. Includes $5 million at December 31, 2015 and
$91 million at December 31, 2014 related to non-U.S.
denominated borrowings with a weighted average interest rate
of 2.2% in 2015 and 7.2% in 2014.
(d) Includes $8 million at December 31, 2015 and $20 million at
December 31, 2014 related to the unamortized gain on interest
rate swap unwinds (see Note 14 Derivatives and Hedging
Instruments).
(e) The fair market value was approximately $9.9 billion at
December 31, 2015 and $10.6 billion at December 31, 2014.
Total maturities of long-term debt over the next five
years are 2016 – $426 million; 2017 – $43 million; 2018
– $811 million; 2019 – $427 million; and 2020 – $183
million.
At December 31, 2015, International Paper’s credit
facilities (the Agreements) totaled $2.1 billion. The
Agreements generally provide for interest rates at a
floating rate index plus a pre-determined margin
dependent upon International Paper’s credit rating. The
Agreements include a $1.5 billion contractually
committed bank facility that expires in August 2019 and
has a facility fee of 0.15% payable annually. The liquidity
facilities also include up to $600 million of uncommitted
financings based on eligible receivables balances
(approximately $600 million available as of December
31, 2015) under a receivables securitization program
that expires in December 2016. At December 31, 2015,
there were no borrowings under either the bank facility
or receivables securitization program.
Maintaining an investment grade credit rating is an
important element of International Paper’s financing
strategy. At December 31, 2015, the Company held
long-term credit ratings of BBB (stable outlook) and
Baa2 (stable outlook) by S&P and Moody’s,
respectively.
NOTE 14 DERIVATIVES AND HEDGING
ACTIVITIES
International Paper periodically uses derivatives and
other financial instruments to hedge exposures to
interest rate, commodity and currency risks.
International Paper does not hold or issue financial
instruments for trading purposes. For hedges that meet
the hedge accounting criteria, International Paper, at
inception, formally designates and documents the
instrument as a fair value hedge, a cash flow hedge or
a net investment hedge of a specific underlying
exposure.
INTEREST RATE RISK MANAGEMENT
Our policy is to manage interest cost using a mixture of
fixed-rate and variable-rate debt. To manage this risk
in a cost-efficient manner, we enter into interest rate
swaps whereby we agree to exchange with the
counterparty, at specified intervals, the difference
between fixed and variable interest amounts calculated
by reference to a notional amount.
Interest rate swaps that meet specific accounting
criteria are accounted for as fair value or cash flow
hedges. For fair value hedges, the changes in the fair
value of both the hedging instruments and the
underlying debt obligations are immediately recognized
in interest expense. For cash flow hedges, the effective
portion of the changes in the fair value of the hedging