Quarterly report pursuant to Section 13 or 15(d)

Long-Term Debt

v3.21.2
Long-Term Debt
9 Months Ended
Sep. 30, 2021
Long-Term Debt  
Long-Term Debt

(6)   Long-Term Debt

Debt is summarized as follows:

Outstanding

 

principal at

Carrying value

 

    

September 30, 2021

    

September 30, 2021

    

December 31, 2020

 

amounts in millions

 

Corporate level debentures

8.5% Senior Debentures due 2029

$

287

 

286

 

285

8.25% Senior Debentures due 2030

 

505

 

502

 

502

4% Exchangeable Senior Debentures due 2029

429

363

362

3.75% Exchangeable Senior Debentures due 2030

431

357

346

1.75% Exchangeable Senior Debentures due 2046

332

714

649

Subsidiary level notes and facilities

QVC 4.375% Senior Secured Notes due 2023

 

750

 

750

 

750

QVC 4.85% Senior Secured Notes due 2024

 

600

 

600

 

600

QVC 4.45% Senior Secured Notes due 2025

600

599

599

QVC 4.75% Senior Secured Notes due 2027

575

575

575

QVC 4.375% Senior Secured Notes due 2028

500

500

500

QVC 5.45% Senior Secured Notes due 2034

400

399

399

QVC 5.95% Senior Secured Notes due 2043

 

300

 

300

 

300

QVC 6.375% Senior Secured Notes due 2067

225

225

225

QVC 6.25% Senior Secured Notes due 2068

500

500

500

3.5% Exchangeable Senior Debentures due 2031

 

210

 

549

 

393

QVC Senior Secured Credit Facility

120

120

Deferred loan costs

(45)

(49)

Total consolidated Qurate Retail debt

$

6,764

 

7,294

 

6,936

Less current classification

 

(1,983)

 

(1,750)

Total long-term debt

$

5,311

 

5,186

QVC Senior Secured Credit Facility

On December 31, 2018, QVC entered into the Fourth Amended and Restated Credit Agreement with Zulily as co-borrower (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 QVC 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 QVC.  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% to 0.75% depending on the Borrowers combined ratio of Consolidated Total Debt to Consolidated EBITDA (the “Combined Consolidated Leverage Ratio”). Borrowings that are London Interbank Offered Rate (“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.

The payment and performance of the Borrowers’ obligations (including Zulily’s 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 QVC 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 QVC’s consolidated leverage ratio, and the Borrowers’ Combined Consolidated Leverage Ratio.

During the nine months ended September 30, 2021, Zulily borrowed $120 million under the Fourth Amended and Restated Credit Agreement, and the interest rate was 1.6% at September 30, 2021. Availability under the Fourth Amended and Restated Credit Agreement at September 30, 2021 was $2,808 million, including the portion available under the $400 million tranche that Zulily may also borrow on.  

On October 27, 2021, the Fourth Amended and Restated Credit Agreement was further amended to, among other things, extend the maturity date to October 2026, improve the stated interest rates and financial covenants, and upsize the amount from $2.95 billion to $3.25 billion.  

Exchangeable Senior Debentures

The Company has elected to account for its exchangeable senior debentures using the fair value option.  Accordingly, changes in the fair value of these instruments are recognized as unrealized gains (losses) in the statements of operations. See note 4 for information related to unrealized gains (losses) on debt measured at fair value.  As of September 30, 2021 the Company’s exchangeable debentures have been classified as current because the Company does not own shares to exchange the debentures or they are currently exchangeable. The Company reviews the terms of the debentures on a quarterly basis to determine whether a triggering event has occurred to require current classification of the exchangeables upon a call event. Although we do not own shares underlying certain of the exchangeable senior debentures, 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 the realized and unrealized gains (losses) on financial instruments, net line item in the condensed statement of operations.  

On October 27, 2021, the bondholders of the 3.5% Exchangeable Senior Debentures due 2031 were sent a redemption notice for redemption in full on December 13, 2021, and will have the ability to exchange their debentures through December 10, 2021.

Debt Covenants

Qurate Retail and its subsidiaries are in compliance with all debt covenants at September 30, 2021.

Fair Value of Debt

Qurate Retail estimates the fair value of its debt based on the quoted market prices for the same or similar issues or on the current rate offered to Qurate Retail for debt of the same remaining maturities (Level 2). The QVC 6.375% Senior Secured Notes due 2067 (“2067 Notes”) and the QVC 6.25% Senior Secured Notes Due 2068 (“2068 Notes”) are traded on the New York Stock Exchange, and the Company considers them to be actively traded. As such, the 2067 Notes and 2068 Notes are valued based on their trading price (Level 1). The fair value of Qurate Retail's publicly traded debt securities

that are not reported at fair value in the accompanying condensed consolidated balance sheet at September 30, 2021 are as follows (amounts in millions):

Senior debentures

$

889

QVC senior secured notes

    

$

4,699

Due to the variable rate nature, Qurate Retail believes that the carrying amount of its other debt, not discussed above, approximated fair value at September 30, 2021.