Intel Corporation Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Borrowings

Borrowings

12 Months Ended

Dec. 28, 2019



NOTE 14 :	BORROWINGS

SHORT-TERM DEBT

As of December 28, 2019, short-term debt was $3.7 billion, primarily comprised of our current portion of long-term debt. As of December 29, 2018, short-term debt was $1.3 billion, comprised of $761 million current portion of long-term debt and $500 million commercial paper and drafts payable.

Our current portion of long-term debt includes our 2009 Debentures, as well as debt classified as short-term based on contractual maturity.

We have an ongoing authorization from our Board of Directors to borrow up to $10.0 billion under our commercial paper program.

LONG-TERM DEBT



	Dec 28, 2019				Dec 29, 2018
(In Millions)	Effective Interest Rate	Amount			Amount
Floating-rate senior notes:
Three-month LIBOR plus 0.08%, due May 2020	2.56%	$	700		$	700
Three-month LIBOR plus 0.35%, due May 2022	2.82%	800			800
Fixed-rate senior notes:
3.25%, due December 2019¹	—%	—			177
1.85%, due May 2020	1.89%	1,000			1,000
2.45%, due July 2020	2.49%	1,750			1,750
1.70%, due May 2021	1.79%	500			500
3.30%, due October 2021	3.71%	2,000			2,000
2.35%, due May 2022	2.74%	750			750
3.10%, due July 2022	3.50%	1,000			1,000
4.00%, due December 2022¹	2.97%	382			389
2.70%, due December 2022	3.09%	1,500			1,500
4.10%, due November 2023	3.22%	400			400
2.88%, due May 2024	3.07%	1,250			1,250
2.70%, due June 2024	2.84%	600			600
3.70%, due July 2025	4.44%	2,250			2,250
2.60%, due May 2026	2.91%	1,000			1,000
3.15%, due May 2027	3.48%	1,000			1,000
2.45%, due November 2029	2.48%	1,250			—
4.00%, due December 2032	3.56%	750			750
4.80%, due October 2041	4.31%	802			802
4.25%, due December 2042	3.74%	567			567
4.90%, due July 2045	4.41%	772			772
4.70%, due December 2045	—%	—			915
4.10%, due May 2046	3.68%	1,250			1,250
4.10%, due May 2047	3.64%	1,000			1,000
4.10%, due August 2047	3.20%	640			640
3.73%, due December 2047	4.07%	1,967			1,967
3.25%, due November 2049	3.26%	1,500			—
Oregon and Arizona bonds:
2.40% - 2.70%, due December 2035 - 2040	2.48%	423			423
5.00%, due March 2049	2.88%	138			—
5.00%, due June 2049	2.48%	438			—
Junior subordinated convertible debentures:
3.25%, due August 2039²	3.37%	372			988
Total senior notes and other borrowings		28,751			27,140
Unamortized premium/discount and issuance costs		(529		)	(891		)
Hedge accounting fair value adjustments		781			(390		)
Long-term debt		29,003			25,859
Current portion of long-term debt		(3,695		)	(761		)
Total long-term debt		$	25,308		$	25,098

To manage foreign currency risk associated with the Australian-dollar-denominated notes issued in 2015, we entered into currency interest rate swaps with an aggregate notional amount of $577 million, which effectively converted these notes to U.S.-dollar-denominated notes. For further discussion on our currency interest rate swaps, see "Note 17: Derivative Financial Instruments." Principal and unamortized discount/issuance costs for the Australian-dollar-denominated notes in the table above were calculated using foreign currency exchange rates as of December 28, 2019 and December 29, 2018.


²	Effective interest rate for the year ended December 29, 2018 was 3.42%.

The fair value of our convertible debentures is determined using discounted cash flow models with observable market inputs, and takes into consideration variables such as interest rate changes, comparable instruments, subordination discount, and credit-rating changes. As of December 28, 2019 and December 29, 2018, the fair value of short- and long-term debt (excluding commercial paper and drafts payable) was $30.6 billion and $27.1 billion, respectively. These liabilities are classified as Level 2 within the fair value hierarchy, based on the nature of the fair value inputs.

Senior Notes

During 2019, we issued a total of $2.8 billion aggregate principal amount of senior notes. Net proceeds from the offering are being used for general corporate purposes, which may include refinancing outstanding debt and repurchasing shares of our common stock.

In 2019, we redeemed our $915 million, 4.70% senior notes due December 2045.

Our floating-rate senior notes pay interest quarterly and our fixed-rate senior notes pay interest semiannually. We may redeem the fixed-rate notes prior to their maturity at our option at specified redemption prices and subject to certain restrictions. The obligations under the notes rank equally in right of payment with all of our other existing and future senior unsecured indebtedness and will effectively rank junior to all liabilities of our subsidiaries.

Oregon and Arizona Bonds

In 2019, we received proceeds of $648 million in aggregate from the sale of the 2019 Arizona Bonds and the 2019 Oregon Bonds. The bonds are our unsecured general obligations in accordance with loan agreements we entered into with the Industrial Development Authority of the City of Chandler, Arizona and the State of Oregon Business Development Commission. The bonds mature in 2049 and carry an interest rate of 5.00%. The 2019 Arizona Bonds and the 2019 Oregon Bonds are subject to mandatory tender in June 2024 and March 2022, respectively, at which time we can re-market the bonds as either fixed-rate bonds for a specified period or as variable-rate bonds until another fixed-rate period is selected or until their final maturity date.

In 2018, we remarketed $423 million principal of the 2018 Arizona Bonds and the 2018 Oregon Bonds. The bonds are our unsecured general obligations in accordance with loan agreements we entered into with the Industrial Development Authority of the City of Chandler, Arizona and the State of Oregon Business Development Commission. The bonds mature between 2035 and 2040 and carry interest rates of 2.40% - 2.70%. Each series of the 2018 Arizona Bonds and the 2018 Oregon Bonds is subject to mandatory tender in August 2023, at which time we can remarket the bonds as either fixed-rate bonds for a specified period, or as variable-rate bonds until another fixed-rate period is selected or their final maturity date.

Convertible Debentures

In 2009, we issued the 2009 Debentures, which pay a fixed rate of interest semiannually. In 2019, we paid $1.5 billion in cash to satisfy conversion obligations for $615 million in principal, resulting in a cumulative loss of $156 million in interest and other, net, and $1.0 billion as a reduction to stockholders' equity related to the conversion feature.

The 2009 Debentures are convertible, subject to certain conditions. Holders can surrender the 2009 Debentures for conversion if the closing price of Intel common stock has been at least 130% of the conversion price then in effect for at least 20 trading days during the 30 consecutive trading-day period ending on the last trading day of the preceding fiscal quarter. We settle conversion of the 2009 Debentures in cash up to the face value, and any amount in excess of face value is settled in cash or stock at our option. As of August 5, 2019, we can redeem, for cash, all or part of the 2009 Debentures for the principal amount, plus any accrued and unpaid interest, if the closing price of Intel common stock has been at least 150% of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading-day period. In November 2019, we issued a notice of redemption for the remaining $372 million of 2009 Debentures with a redemption date of January 9, 2020. During the fourth quarter of 2019, the closing stock price conversion right condition of the 2009 Debentures continued to be met and therefore the debentures are convertible at the option of the holders until January 6, 2020, prior to our redemption. Our 2009 Debentures required settlement of the principal amount of the debt in cash upon conversion.

As a result, the $217 million carrying amount of the 2009 Debentures was classified as short-term debt on our Consolidated Balance Sheet as of December 28, 2019 ($569 million as of December 29, 2018). The excess of the amount required to be settled in cash if converted over the carrying amount of the 2009 Debentures of $155 million has been classified as temporary equity on our Consolidated Balance Sheet as of December 28, 2019 ($419 million as of December 29, 2018).

The 2009 Debentures are subordinated in right of payment to any existing and future senior debt and to the other liabilities of our subsidiaries. We have concluded that the 2009 Debentures are not conventional convertible debt instruments and that the embedded stock conversion options qualify as derivatives. In addition, we have concluded that the embedded conversion options would be classified in stockholders' equity if they were freestanding derivative instruments and are not accounted for separately as derivative liabilities.



	2009 Debentures
(In Millions, Except Per Share Amounts)	Dec 28, 2019		Dec 29, 2018
Outstanding principal	$	372	$	988
Unamortized discount¹	$	155	$	419
Net debt carrying amount	$	217	$	569
Conversion rate (shares of common stock per $1,000 principal amount of debentures)	49.69		49.01
Effective conversion price (per share of common stock)	$	20.13	$	20.40


¹	The unamortized discounts for the 2009 Debentures are amortized over the remaining life of the debt.

Debt Maturities

Our aggregate debt maturities, excluding commercial paper and drafts payable, based on outstanding principal as of December 28, 2019, by year payable, are as follows:



(In Millions)	2020		2021		2022		2023		2024		2025 and thereafter		Total
	$	3,450	$	2,500	$	4,432	$	400	$	1,850	$	16,119	$	28,751

In the preceding table, the 2009 Debentures are classified based on their stated maturity date, regardless of their classification on the Consolidated Balance Sheet.