Interpreting Debt Footnotes on Interest Rates and Interest Expense Boston Scientific discloses the following as part of its long-term debt footnote in its December 31, 2018 10-K. Borrowings and Credit Agreements In millions, except interest rates January 2020 Notes May 2020 Notes May 2022 Notes October 2023 Notes May 2025 Notes March 2028 Notes November 2035 Notes January 2040 Notes Unamortized debt insurance discount and deferred financing cost Unamortized gain on fair value hedge Capital lease obligation Long-term debt Issuance Date Maturity Date December 2009 January 2020 May 2015 May 2020 May 2015 May 2022 August 2013 October 2023 May 2015 May 2025 February 2018 March 2028 November 2005 November 2035 December 2009 January 2040 Semi- annual As of December 31, Coupon 2018 2017 Rate $850 $850 6.00% 600 600 2.85% 500 500 3.38% 450 450 4.13% 750 750 3.85% 1,000 4.00% 350 350 7.00% 300 300 7.38% 2020-2040 2020-2025 Various (29) 26 (24) 38 6 1 $4,803 $3,815 (1) Corporate credit rating improvements may result in a decrease in the adjusted interest rate on our November 2035 Notes to the extent that our lowest credit rating is above BBB-or Baa3. The interest rates on our November 2035 notes will be permanently reinstated to the issuance rate if the lowest credit ratings assigned to these senior notes is either A- or A3 or higher. Boston Scientific discloses its required principal debt repayments due during each of the next five years and thereafter. In millions 2019 $2,248 2020 1,540 2021 2022 500 2023 450 Thereafter 2,400 Boston Scientific also discloses the following information. Interest Expense The following table provides a summary of our Interest expense and average borrowing rate : Year Ended December 31 (in millions) 2018 2017 2016 Interest expense $(241) $(229) $(233) Weighted average borrowing rate 3.60% 3.80% 4.00% Cash paid for interest $(262) $(235) $(233) The price of the Boston Scientific's bonds in February 2019 follows. Moody's Rating Maturity date Coupon Current Price Current Yield (02/21/2019) 2028 4.00% 109.35 2.80% Baa2 2023 4.13% 101.57 2.41% Baa2 Required a. What amount of Boston Scientific's long-term debt is due in 2019? $ 0 million b. What is the total amount of Boston Scientific's long-term debt at December 31, 2018, including the current maturities? $ 0 million c. The company's balance sheet reports short-term debt including current maturities of $2,253 million and $1,801 million in 2018 and 2017, respectively. Compute the average effective interest rate on the company's total debt for fiscal 2018. Compare this to the average interest rate the company reports. Note: Round percentage to one decimal place (for example, enter 6.7% for 6.6555%). Computed average effective interest rate Company's reported average interest rate 0 % 0 % Check Interpreting Debt Footnotes on Interest Rates and Interest Expense Boston Scientific discloses the following as part of its long-term debt footnote in its December 31, 2018 10-K. Borrowings and Credit Agreements In millions, except interest rates January 2020 Notes May 2020 Notes May 2022 Notes October 2023 Notes May 2025 Notes March 2028 Notes November 2035 Notes January 2040 Notes Unamortized debt insurance discount and deferred financing cost Unamortized gain on fair value hedge Capital lease obligation Long-term debt Issuance Date Maturity Date December 2009 January 2020 May 2015 May 2020 May 2015 May 2022 August 2013 October 2023 May 2015 May 2025 February 2018 March 2028 November 2005 November 2035 December 2009 January 2040 Semi- annual As of December 31, Coupon 2018 2017 Rate $850 $850 6.00% 600 600 2.85% 500 500 3.38% 450 450 4.13% 750 750 3.85% 1,000 4.00% 350 350 7.00% 300 300 7.38% 2020-2040 2020-2025 Various (29) 26 (24) 38 6 1 $4,803 $3,815 (1) Corporate credit rating improvements may result in a decrease in the adjusted interest rate on our November 2035 Notes to the extent that our lowest credit rating is above BBB-or Baa3. The interest rates on our November 2035 notes will be permanently reinstated to the issuance rate if the lowest credit ratings assigned to these senior notes is either A- or A3 or higher. Boston Scientific discloses its required principal debt repayments due during each of the next five years and thereafter. In millions 2019 $2,248 2020 1,540 2021 2022 500 2023 450 Thereafter 2,400 Boston Scientific also discloses the following information. Interest Expense The following table provides a summary of our Interest expense and average borrowing rate : Year Ended December 31 (in millions) 2018 2017 2016 Interest expense $(241) $(229) $(233) Weighted average borrowing rate 3.60% 3.80% 4.00% Cash paid for interest $(262) $(235) $(233) The price of the Boston Scientific's bonds in February 2019 follows. Moody's Rating Maturity date Coupon Current Price Current Yield (02/21/2019) 2028 4.00% 109.35 2.80% Baa2 2023 4.13% 101.57 2.41% Baa2 Required a. What amount of Boston Scientific's long-term debt is due in 2019? $ 0 million b. What is the total amount of Boston Scientific's long-term debt at December 31, 2018, including the current maturities? $ 0 million c. The company's balance sheet reports short-term debt including current maturities of $2,253 million and $1,801 million in 2018 and 2017, respectively. Compute the average effective interest rate on the company's total debt for fiscal 2018. Compare this to the average interest rate the company reports. Note: Round percentage to one decimal place (for example, enter 6.7% for 6.6555%). Computed average effective interest rate Company's reported average interest rate 0 % 0 % Check
