VMWARE LLC - 10-Q filing on 2021-06-07

Debt

3 Months Ended

Apr. 30, 2021

Unsecured Senior Notes

On April 7, 2020, VMware issued three series of unsecured senior notes pursuant to a public debt offering. The proceeds from the issuance were $2.0 billion, net of debt discount of $3 million and debt issuance costs of $17 million. VMware also has three series of unsecured senior notes issued on August 21, 2017 (collectively with the notes issued April 7, 2020, the “Senior Notes”).

The carrying value of the Senior Notes as of the periods presented was as follows (amounts in millions):


	April 30,		January 29,		Effective Interest Rate
	2021		2021
Senior Notes issued August 21, 2017:
2.95% Senior Note Due August 21, 2022	$	1,500	$	1,500	3.17%
3.90% Senior Note Due August 21, 2027	1,250		1,250		4.05%
Senior Notes issued April 7, 2020:
4.50% Senior Note Due May 15, 2025	750		750		4.70%
4.65% Senior Note Due May 15, 2027	500		500		4.80%
4.70% Senior Note Due May 15, 2030	750		750		4.86%
Total principal amount	4,750		4,750
Less: unamortized discount	(6)		(7)
Less: unamortized debt issuance costs	(25)		(26)
Net carrying amount included in long-term debt	$	4,719	$	4,717

Interest on the Senior Notes issued on April 7, 2020 is payable semiannually in arrears, on May 15 and November 15 of each year, beginning November 15, 2020. The interest rate on each note issued on April 7, 2020 is subject to adjustment based on certain rating events. Interest on the Senior Notes issued on August 21, 2017 is payable semiannually in arrears, on February 21 and August 21 of each year. Interest expense was $48 million and $39 million during the three months ended April 30, 2021 and May 1, 2020, respectively. Interest expense, which included amortization of discount and issuance costs, was recognized on the condensed consolidated statements of income. The discount and issuance costs are amortized over the term of the Senior Notes on a straight-line basis, which approximates the effective interest method.

The Senior Notes are redeemable in whole at any time or in part from time to time at VMware’s option, subject to a make-whole premium. In addition, upon the occurrence of certain change-of-control triggering events and certain downgrades of the ratings on the Senior Notes, VMware may be required to repurchase the notes at a repurchase price equal to 101% of the aggregate principal plus any accrued and unpaid interest on the date of repurchase. The Senior Notes rank equally in right of payment with VMware’s other unsecured and unsubordinated indebtedness. The Senior Notes contain restrictive covenants that, in certain circumstances, limit VMware’s ability to create certain liens, to enter into certain sale and leaseback transactions and to consolidate, merge, sell or otherwise dispose of all or substantially all of VMware’s assets.

Refer to Note C for disclosure regarding the note payable to Dell.

Revolving Credit Facility

On September 12, 2017, VMware entered into an unsecured credit agreement establishing a revolving credit facility with a syndicate of lenders that provides the Company with a borrowing capacity of up to $1.0 billion for general corporate purposes. Commitments under the revolving credit facility are available for a period of five years, which may be extended, subject to the satisfaction of certain conditions, by up to two one-year periods. As of April 30, 2021 and January 29, 2021, there was no outstanding borrowing under the revolving credit facility. The credit agreement contains certain representations, warranties and

covenants. Commitment fees, interest rates and other terms of borrowing under the revolving credit facility may vary based on VMware’s external credit ratings. The amount paid in connection with the ongoing commitment fee, which is payable quarterly in arrears, was not significant during the three months ended April 30, 2021 and May 1, 2020.