K. Borrowings
Short-term debt
| ($ in millions) | ||
| At December 31: | 2008 | 2007 |
|---|---|---|
| Commercial paper | $468 | $5,831 |
| Short-term loans | 1,827 | 2,714 |
| Long-term debt — current maturities | 8,942 | 3,690 |
| Total | $11,236 | $12,235 |
The weighted-average interest rates for commercial paper at December 31, 2008 and 2007, were 3.1 percent and 4.4 percent, respectively. The weighted-average interest rates for short-term loans were 4.5 percent and 4.8 percent at December 31, 2008 and 2007, respectively.
Long-term debt
Pre-Swap Borrowing
| ($ in millions) | |||
| At December 31: | Maturities | 2008 | 2007 |
|---|---|---|---|
|
* $8.1 billion in debt securities issued by IBM International Group Capital LLC, which is an indirect, 100 percent owned finance subsidiary of the company, is included in 2009-2011 ($6.5 billion), 2012-2013 ($1.5 billion) and 2014-2018 ($0.1 billion). Debt securities issued by IBM International Group Capital LLC are fully and unconditionally guaranteed by the company. ** In accordance with the requirements of SFAS No. 133, the portion of the company’s fixed-rate debt obligations that is hedged is reflected in the Consolidated Statement of Financial Position as an amount equal to the sum of the debt’s carrying value plus an SFAS No. 133 fair value adjustment representing changes in the fair value of the hedged debt obligations attributable to movements in benchmark interest rates. |
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| U.S. Dollar Notes and Debentures (average interest rate at December 31, 2008): | |||
| 3.55% | 2009 – 2011 | $10,496* | $12,295 |
| 5.67% | 2012 – 2013 | 5,053* | 3,545 |
| 6.25% | 2014 – 2018 | 4,761* | 3,026 |
| 8.375% | 2019 | 750 | 750 |
| 7.00% | 2025 | 600 | 600 |
| 6.22% | 2027 | 469 | 469 |
| 6.50% | 2028 | 313 | 313 |
| 5.875% | 2032 | 600 | 600 |
| 8.00% | 2038 | 1,000 | — |
| 7.00% | 2045 | 150 | 150 |
| 7.125% | 2096 | 850 | 850 |
| 25,041 | 22,598 | ||
| Other currencies (average interest rate at December 31, 2008, in parentheses): | |||
| Euros (4.4%) | 2010 – 2014 | 3,330 | 2,466 |
| Japanese yen (1.8%) | 2010 – 2014 | 1,457 | 767 |
| Swiss francs (3.4%) | 2011 – 2014 | 470 | 442 |
| Other (10.2%) | 2009 – 2013 | 203 | 89 |
| 30,502 | 26,362 | ||
| Less: Net unamortized discount | 81 | 65 | |
| Add: SFAS No. 133 fair value adjustment** | 1,210 | 432 | |
| 31,631 | 26,729 | ||
| Less: Current maturities | 8,942 | 3,690 | |
| Total | $22,689 | $23,039 | |
Post-swap borrowing (long-term debt, including current portion)
| ($ in millions) | ||||
| 2008 |
2007 | |||
|---|---|---|---|---|
| At December 31: | Amount | Average Rate | Amount | Average Rate |
* Includes $1,700 million in 2008 and $2,600 million in 2007 of notional interest rate swaps that effectively convert floating-rate long-term debt into fixed-rate debt. (See note L, “Derivatives and Hedging Transactions.”) ** Includes $7,435 million in 2008 and $9,606 million in 2007 of notional interest rate swaps that effectively convert the fixed-rate long-term debt into floating-rate debt. |
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| Fixed-rate debt* | $16,608 | 6.16% | $10,922 | 5.48% |
| Floating-rate debt** | 15,023 | 3.35% | 15,807 | 4.76% |
| Total | $31,631 | $26,729 | ||
Pre-swap annual contractual maturities of long-term debt outstanding at December 31, 2008, are as follows:
| ($ in millions) | |
| 2009 | $8,931 |
| 2010 | 2,170 |
| 2011 | 3,097 |
| 2012 | 3,078 |
| 2013 | 2,557 |
| 2014 and beyond | 10,668 |
| Total | $30,502 |
Interest on debt
| ($ in millions) | |||
| For the year ended December 31: | 2008 | 2007 | 2006 |
|---|---|---|---|
| Cost of financing | $788 | $811 | $692 |
| Interest expense | 687 | 753 | 398 |
| Net investment derivative activity | (13) | (142) | (120) |
| Interest capitalized | 15 | 9 | 11 |
| Total interest paid and accrued | $1,477 | $1,431 | $981 |
Refer to the related discussion in note V, “Segment Information,” for total interest expense of the Global Financing segment. See note L, “Derivatives and Hedging Transactions,” for a discussion of the use of currency and interest rate swaps in the company’s debt risk management program.
Lines of credit
The company maintains a five-year, $10 billion Credit Agreement (the Credit Agreement), which expires on June 28, 2012. The total expense recorded by the company related to this facility was $6.2 million in 2008, $6.2 million in 2007 and $7.4 million in 2006. The amended Credit Agreement permits the company and its Subsidiary Borrowers to borrow up to $10 billion on a revolving basis. Borrowings of the Subsidiary Borrowers will be unconditionally backed by the company. The company may also, upon the agreement of either existing lenders, or of the additional banks not currently party to the Credit Agreement, increase the commitments under the Credit Agreement up to an additional $2.0 billion. Subject to certain terms of the Credit Agreement, the company and Subsidiary Borrowers may borrow, prepay and reborrow amounts under the Credit Agreement at any time during the Credit Agreement. Interest rates on borrowings under the Credit Agreement will be based on prevailing market interest rates, as further described in the Credit Agreement. The Credit Agreement contains customary representations and warranties, covenants, events of default, and indemnification provisions. The company believes that circumstances that might give rise to breach of these covenants or an event of default, as specified in the Credit Agreement are remote. The company’s other lines of credit, most of which are uncommitted, totaled approximately $11,031 million and $9,992 million at December 31, 2008 and 2007, respectively. Interest rates and other terms of borrowing under these lines of credit vary from country to country, depending on local market conditions.
| ($ in millions) | ||
| At December 31: | 2008 | 2007 |
|---|---|---|
| Unused lines: | ||
| From the committed global credit facility | $9,888 | $9,792 |
| From other committed and uncommitted lines | 8,376 | 7,895 |
| Total unused lines of credit | $18,264 | $17,687 |
