Long-Term Debt |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt disclosure |
Long-Term Debt and Capital Lease Obligations
Long-term debt and capital lease obligations consisted of the following:
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. With the exception of the notes in item (h) below, the interest on QVC's senior secured notes is payable semi-annually. At December 31, 2018, the 3.125% Senior Secured Notes due 2019 are classified within current portion of long-term debt as they mature in less than one year from December 31, 2018.
(a) 3.125% Senior Secured Notes due 2019
On March 18, 2014, QVC issued $400 million principal amount of 3.125% Senior Secured Notes due 2019 at an issue price of 99.828%. The net proceeds from the offerings of these notes were used to repay indebtedness under QVC’s senior secured credit facility and for working capital and other general corporate purposes.
(b) 5.125% Senior Secured Notes due 2022
On July 2, 2012, QVC issued $500 million principal amount of 5.125% Senior Secured Notes due 2022 at par. The net proceeds from the offerings of these notes were used to repay indebtedness under QVC’s senior secured credit facility and for working capital and other general corporate purposes.
(c) 4.375% Senior Secured Notes due 2023
On March 18, 2013, QVC issued $750 million principal amount of 4.375% Senior Secured Notes due 2023 at an issue price of 99.968%. The net proceeds from the offerings of these notes were used to reduce the outstanding principal of previously outstanding notes and the senior secured credit facility, as well as for general corporate purposes.
(d) 4.85% Senior Secured Notes due 2024
On March 18, 2014, QVC issued $600 million principal amount of 4.85% Senior Secured Notes due 2024 at an issue price of 99.927%. The net proceeds from the offerings of these notes were used to repay indebtedness under QVC’s senior secured credit facility and for working capital and other general corporate purposes.
(e) 4.45% Senior Secured Notes due 2025
On August 21, 2014, QVC issued $600 million principal amount of 4.45% Senior Secured Notes due 2025 at an issue price of 99.860%. The net proceeds from the offerings of these notes were used for the redemption of previously outstanding notes, for working capital and other general corporate purposes.
(f) 5.45% Senior Secured Notes due 2034
On August 21, 2014, QVC issued $400 million principal amount of 5.45% Senior Secured Notes due 2034 at an issue price of 99.784%. The net proceeds from the offerings of these notes were used for the redemption of previously outstanding notes, for working capital and other general corporate purposes.
(g) 5.95% Senior Secured Notes due 2043
On March 18, 2013, QVC issued $300 million principal amount of 5.95% Senior Secured Notes due 2043 at an issue price of 99.973%. The net proceeds from the offerings of these notes were used to reduce the principal of previously outstanding notes and the senior secured credit facility, as well as for general corporate purposes.
(h) 6.375% Senior Secured Notes due 2067
On September 13, 2018, QVC completed a registered debt offering for $225 million of 6.375% Senior Secured Notes due 2067 ("2067 Notes") at par. The proceeds were used to partially prepay existing indebtedness under QVC's senior secured credit facility and for general corporate purposes. The costs to complete the financing were deferred and are being amortized to interest expense over the term of the 2067 Notes. Interest on the 2067 Notes will be paid quarterly in March, June, September, and December, which commenced on December 15, 2018. QVC has the option to call the 2067 Notes after 5 years at par value.
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 $3.65 billion revolving credit facility with a $450 million sub-limit for standby letters of credit and $1.8 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 an additional $50 million sub-limit for standby letters of credit (see note 14). The remaining $3.25 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 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.
QVC had $2,310 million available under the terms of the senior secured credit facility at December 31, 2018, including the portion available under the $400 million tranche on which zulily may also borrow. The interest rate on the senior secured credit facility was 3.9% at December 31, 2018.
The purpose of the amendment was to, among other things, repay certain fees and expenses, finance working capital needs and general corporate purposes of the Company and its respective subsidiaries and make certain restricted payments and loans to the Company's respective parents and affiliates. 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.
On January 27, 2015, HSN entered into a $1.25 billion five-year syndicated credit agreement ("HSN Credit Agreement") which was secured by 100% of the voting equity securities of HSN's U.S. subsidiaries and 65% of HSN's first-tier foreign subsidiaries. Certain HSN subsidiaries had unconditionally guaranteed HSN's obligations under the HSN Credit Agreement. The HSN Credit Agreement, which included a $750 million revolving credit facility and a $500 million term loan, could be increased up to $1.75 billion subject to certain conditions and was set to expire on January 27, 2020. On December 29, 2017, the HSN Credit Agreement was amended, the outstanding balance on the term loan was repaid, and the revolving credit facility was increased to $1 billion. The maturity of the revolving credit facility was extended to December 29, 2022. Loans under the amended HSN Credit Agreement bore interest at a per annum rate equal to LIBOR plus a predetermined margin that ranged from 1.25% to 1.75% or the Base Rate (as defined in the amended HSN Credit Agreement) plus a predetermined margin that ranged from 0.25% to 0.75%. HSN paid a commitment fee ranging from 0.20% to 0.30% (based on the leverage ratio) on the unused portion of the revolving credit facility. On December 31, 2018, the HSN Credit Agreement was terminated and the outstanding balance was repaid. As a result of the termination of the HSN Credit Agreement, the Company recorded a loss on debt extinguishment of $2 million within the consolidated statement of operations.
Interest Rate Swap Arrangements
During the year ended December 31, 2016, QVC entered into a three-year interest rate swap arrangement with a notional amount of $125 million to mitigate the interest rate risk associated with interest payments related to its variable rate debt. The swap arrangement does not qualify as a cash flow hedge under U.S. GAAP. Accordingly, changes in the fair value of the swap are reflected in (losses) gains on financial instruments in the accompanying consolidated statements of operations. At December 31, 2018 the fair value of the swap instrument was in a net asset position of approximately $1 million which was included in prepaid expenses and other current assets. At December 31, 2017 the fair value of the swap instrument was in a net asset position of approximately $2 million which was included in other noncurrent assets.
As of December 31, 2017, HSN had an outstanding interest rate swap that was in a net asset position of $5 million, which was included in other noncurrent assets, that effectively converted $250 million of its variable rate bank credit facility to a fixed rate of 1.05% with a maturity date in January 2020 (the swapped fixed rate was exclusive of the credit spread under the HSN Credit Agreement). Based on HSN's leverage ratio as of December 31, 2017, the all-in fixed rate was 2.35%. The Company accounted for the interest rate swap at fair value with changes recorded through (losses) gains on financial instruments in the consolidated statements of operations. On December 31, 2018, the interest rate swap was terminated as a result of the termination of the HSN Credit Agreement. Subsequently, QVC entered into a thirteen month interest rate swap arrangement with the same terms. The new swap instrument does not qualify as a cash flow hedge and the fair value of the swap instrument was in a net asset position of approximately $4 million as of December 31, 2018, which was included in prepaid expenses and other current assets.
Other Debt Related Information
QVC was in compliance with all of its debt covenants at December 31, 2018.
During the year ended December 31, 2018, there were no significant changes to QVC's debt credit ratings.
The weighted average interest rate applicable to all of the outstanding debt (excluding capital leases) prior to amortization of bond discounts and related debt issuance costs was 4.6% as of December 31, 2018.
At December 31, 2018 and 2017, outstanding trade letters of credit totaled $13 million and $21 million, respectively.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||