Debt

Changes to debt during the six months ended June 30, 2017 are as follows:


(dollars in millions)	Debt Maturing within One Year			Long-term Debt			Total
Balance at January 1, 2017	$	2,645		$	105,433		$	108,078
Proceeds from long-term borrowings		65			15,944			16,009
Proceeds from asset-backed long-term borrowings		-			2,878			2,878
Repayments of long-term borrowings and capital leases obligations		(3,158	)		(7,136	)		(10,294	)
Decrease in short-term obligations, excluding current maturities		(152	)		-			(152	)
Reclassifications of long-term debt		1,569			(1,569	)		-
Debt acquired (Note 2)		7			52			59
Other		177			788			965

Balance at June 30, 2017	$	1,153		$	116,390		$	117,543

January Exchange Offers and Cash Offers

On January 25, 2017, we commenced eighteen separate private offers to exchange (the January Exchange Offers) specified series of outstanding Notes issued by Verizon Communications (the Old Notes) for new Notes to be issued by Verizon Communications and, for certain series, cash. In connection with the January Exchange Offers, which expired on January 31, 2017 and settled on February 3, 2017, we issued $3.2 billion aggregate principal amount of Verizon Communications 2.946% Notes due 2022 (the 2022 New Notes), $1.7 billion aggregate principal amount of Verizon Communications 4.812% Notes due 2039 (the 2039 New Notes) and $4.1 billion aggregate principal amount of Verizon Communications 5.012% Notes due 2049 (the 2049 New Notes) plus applicable cash of $0.6 billion (not including accrued and unpaid interest on the Old Notes) in exchange for $8.3 billion aggregate principal amount of tendered Old Notes.

We concurrently commenced eighteen separate offers to purchase for cash (the January Cash Offers) the Old Notes. In connection with the January Cash Offers, which expired on January 31, 2017 and settled on February 3, 2017, we repurchased $0.5 billion aggregate principal amount of Old Notes for $0.5 billion, exclusive of accrued interest. On February 10, 2017, we purchased for $0.1 billion, exclusive of accrued interest, an additional $0.1 billion of Old Notes (the “subsequent cash purchases”) from certain holders whose tenders of Old Notes in the January Cash Offers had been rejected.

The table below lists the series of Old Notes included in the January Exchange Offers for the 2022 New Notes and the January Cash Offers, referred to as Group 1:


(dollars in millions)	Interest Rate		Maturity		Principal Amount Outstanding		Principal Amount Accepted for Exchange		Principal Amount Accepted for Cash ⁽¹⁾
Verizon Communications Inc.		5.500%		2018	$	737	$	83	$	8
		6.100%		2018		753		77		9
		3.650%		2018		2,698		508		97
		2.550%		2019		500		154		35
		1.375%		2019		1,000		376		38
		2.625%		2020		3,304		1,925		55

							$	3,123	$	242


⁽¹⁾ Includes amounts acquired pursuant to the subsequent cash purchases.

The table below lists the series of Old Notes included in the January Exchange Offers for the 2039 New Notes and the January Cash Offers, referred to as Group 2:



(dollars in millions)	Interest Rate		Maturity		Principal Amount Outstanding		Principal Amount Accepted for Exchange		Principal Amount Accepted for Cash ⁽¹⁾
Verizon Communications Inc.		5.150%		2023	$	8,517	$	715	$	217
		7.750%		2030		930		184		4
		7.750%		2032		218		2		-
		6.400%		2033		1,729		640		6

							$	1,541	$	227

⁽¹⁾ Includes amounts acquired pursuant to the subsequent cash purchases.

The table below lists the series of Old Notes included in the January Exchange Offers for the 2049 New Notes and the January Cash Offers, referred to as Group 3:


(dollars in millions)	Interest Rate		Maturity		Principal Amount Outstanding		Principal Amount Accepted for Exchange		Principal Amount Accepted for Cash ⁽¹⁾
Verizon Communications Inc.		5.850%		2035	$	1,250	$	447	$	4
		6.250%		2037		636		189		5
		6.400%		2038		750		228		6
		6.900%		2038		384		111		4
		8.950%		2039		290		48		-
		7.350%		2039		412		225		1
		6.000%		2041		1,000		480		20
		6.550%		2043		4,245		1,933		46

							$	3,661	$	86


⁽¹⁾ Includes amounts acquired pursuant to the subsequent cash purchases.

Term Loan Credit Agreement

In March 2017, we prepaid $1.7 billion of the outstanding $3.3 billion term loan that had an original maturity date of July 2019. During April 2017, we repaid the remaining outstanding amount under the term loan agreement.

March Tender Offer

On March 13, 2017, we announced the commencement of a tender offer (the March Tender Offer) to purchase for cash any and all of the series of notes listed below. The Tender Offer expired on March 17, 2017 and most of which was settled on March 20, 2017. In addition to the purchase price, any accrued and unpaid interest on the purchased notes was paid to the date of purchase.



(dollars in millions, except for Purchase Price)	Interest Rate		Maturity		Principal Amount Outstanding		Purchase Price ⁽¹⁾		Principal Amount Purchased
Verizon Communications Inc.		8.950%		2039	$	242	$	1,537.18	$	131
		7.750%		2032		215		1,341.68		36
		6.550%		2043		2,266		1,239.85		847
		6.400%		2033		1,083		1,216.85		612
		7.350%		2039		186		1,324.60		27
		6.900%		2038		270		1,273.29		49
		7.750%		2030		742		1,379.04		160
		6.400%		2038		515		1,206.61		118
		6.250%		2037		443		1,189.56		103
		5.850%		2035		800		1,151.79		249
		6.000%		2041		500		1,151.23		206
		6.100%		2018		667		1,048.45		153
		5.500%		2018		646		1,037.01		113

Verizon New York Inc.		7.375%		2032		244		1,285.50		39
		6.500%		2028		72		1,177.23		1

Verizon Pennsylvania LLC		8.750%		2031		53		1,426.33		17
		8.350%		2030		48		1,384.37		16
		6.000%		2028		68		1,139.69		11

Verizon Delaware LLC		8.625%		2031		10		1,416.70		8
Verizon Maryland LLC		8.300%		2031		24		1,378.75		2
		8.000%		2029		28		1,332.71		1
		5.125%		2033		179		1,063.06		15

Verizon Virginia LLC		8.375%		2029		19		1,367.57		9
		7.875%		2022		57		1,206.35		-

Verizon New England Inc.		7.875%		2029		173		1,322.35		26

Verizon New Jersey Inc.		7.850%		2029		87		1,319.96		8
		8.000%		2022		146		1,227.16		25

GTE LLC		8.750%		2021		207		1,240.28		14
		6.940%		2028		413		1,270.73		85
		6.840%		2018		332		1,056.27		38

									$	3,119

⁽¹⁾	Per $1,000 principal amount of notes tendered.

Debt Issuances and Redemptions

During February 2017, we redeemed $0.2 billion of the $0.6 billion 6.94% GTE LLC Notes due 2028 at 124.8% of the principal amount of the notes redeemed (see “Early Debt Redemptions”).

During February 2017, we issued approximately $1.5 billion aggregate principal amount of 4.95% Notes due 2047. The issuance of these notes resulted in cash proceeds of approximately $1.5 billion, net of discounts and issuance costs and after reimbursement of certain expenses. The net proceeds were used for general corporate purposes.

During March 2017, we issued $11.0 billion aggregate principal amount of fixed and floating rate notes. The issuance of these notes resulted in cash proceeds of approximately $10.9 billion, net of discounts and issuance costs and after reimbursement of certain expenses. The issuance consisted of the following series of notes: $1.4 billion aggregate principal amount of Verizon Communications Floating Rate Notes due 2022, $1.85 billion aggregate principal amount of Verizon Communications 3.125% Notes due 2022, $3.25 billion aggregate principal amount of Verizon Communications 4.125% Notes due 2027, $3.0 billion aggregate principal amount of Verizon Communications 5.250% Notes due 2037, and $1.5 billion aggregate principal amount of Verizon Communications 5.500% Notes due 2047. The floating rate notes bear interest at a rate equal to the three-month LIBOR plus 1.000% which rate will be reset quarterly. The net proceeds were primarily used for the tender offer and general corporate purposes, including discretionary contributions to our qualified pension plans of $3.4 billion. We used the remaining net proceeds for the financing of our acquisition of Yahoo’s operating business.

During April 2017, we redeemed in whole $0.5 billion aggregate principal amount of Verizon Communications 6.100% Notes due 2018 at 104.5% of the principal amount of such notes and $0.5 billion aggregate principal amount of Verizon Communications 5.50% Notes due 2018 at 103.3% of the principal amount of such notes, plus accrued and unpaid interest to the date of redemption.

During May 2017, we issued $1.5 billion aggregate principal amount of Verizon Communications floating rate notes due 2020. The issuance of these notes resulted in cash proceeds of approximately $1.5 billion, net of discounts and issuance costs and after reimbursement of certain expenses. The floating rate notes bear interest at a rate equal to three-month LIBOR plus 0.550% which will be reset quarterly. The net proceeds were primarily used for general corporate purposes, which included the repayment of outstanding indebtedness. In addition we issued CHF 0.6 billion aggregate principal amount of Verizon Communications 0.375% Bonds due 2023, and CHF 0.4 billion aggregate principal amount of Verizon Communications 1.00% Bonds due 2027. The issuance of these bonds resulted in cash proceeds of approximately $1.0 billion, net of discounts and issuance costs. The net proceeds were primarily used for general corporate purposes including the repayment of debt.

During May 2017, we initiated a retail notes program in connection with the issuance and sale from time to time of our notes that are due nine months or more from the date of issue. As of June 30, 2017 we have issued $0.5 billion of Verizon Communication Notes with interest rates ranging from 2.600% to 4.900% and maturity dates ranging from 2022 to 2047.

During June 2017, $1.3 billion of Verizon Communication floating rate notes matured and were repaid.

During June 2017, we redeemed in whole $0.5 billion aggregate principal amount of Verizon Communications 1.100% Notes due 2017 at 100.003% of the principal amount of such notes, plus accrued and unpaid interest to the date of redemption.

Asset-Backed Debt

As of June 30, 2017, the carrying value of our asset-backed debt was $7.9 billion. Our asset-backed debt includes notes (the Asset-Backed Notes) issued to third-party investors (Investors) and loans (ABS Financing Facility) received from banks and their conduit facilities (collectively, the Banks). Our consolidated asset-backed securitization bankruptcy remote legal entities (each, an ABS Entity or collectively, the ABS Entities) issue the debt or are otherwise party to the transaction documentation in connection with our asset-backed debt transactions. Under the terms of our asset-backed debt, we transfer device payment plan agreement receivables from Cellco Partnership and certain other affiliates of Verizon (collectively, the Originators) to one of the ABS Entities, which in turn transfers such receivables to another ABS Entity that issues the debt. Verizon entities retain the equity interests in the ABS Entities, which represent the rights to all funds not needed to make required payments on the asset-backed debt and other related payments and expenses.

Our asset-backed debt is secured by the transferred device payment plan agreement receivables and future collections on such receivables. The device payment plan agreement receivables transferred to the ABS Entities and related assets, consisting primarily of restricted cash, will only be available for payment of asset-backed debt and expenses related thereto, payments to the Originators in respect of additional transfers of device payment plan agreement receivables, and other obligations arising from our asset-backed debt transactions, and will not be available to pay other obligations or claims of Verizon’s creditors until the associated asset-backed debt and other obligations are satisfied. The Investors or Banks, as applicable, which hold our asset-backed debt have legal recourse to the assets securing the debt, but do not have any recourse to Verizon with respect to the payment of principal and interest on the debt. Under a parent support agreement, Verizon has agreed to guarantee certain of the payment obligations of Cellco Partnership and the Originators to the ABS Entities.

Cash collections on the device payment plan agreement receivables are required at certain specified times to be placed into segregated accounts. Deposits to the segregated accounts are considered restricted cash and are included in Prepaid expenses and other and Other assets on our condensed consolidated balance sheets.

Proceeds from our asset-backed debt transactions, deposits to the segregated accounts and payments to the Originators in respect of additional transfers of device payment plan agreement receivables are reflected in Cash flows from financing activities in our condensed consolidated statements of cash flows. Repayments of our asset-backed debt and related interest payments made from the segregated accounts are non-cash activities and therefore not reflected within Cash flows from financing activities in our condensed consolidated statements of cash flows. The asset-backed debt issued and the assets securing this debt are included on our condensed consolidated balance sheets.

Asset-Backed Notes

In March 2017, we issued approximately $1.3 billion aggregate principal amount of senior and junior Asset-Backed Notes through an ABS Entity. The Class A senior Asset-Backed Notes had an expected weighted-average life to maturity of 2.6 years at issuance and bear interest at 2.06% per annum, the Class B junior Asset-Backed Notes had an expected weighted-average life to maturity of 3.38 years at issuance and bear interest at 2.45% per annum and the Class C junior Asset-Backed Notes had an expected weighted-average life to maturity of 3.64 years at issuance and bear interest at 2.65% per annum.

In June 2017, we issued approximately $1.3 billion aggregate principal amount of senior and junior Asset-Backed Notes through an ABS Entity. The Class A senior Asset-Backed Notes had an expected weighted-average life to maturity of 2.47 years at issuance and bear interest at 1.92% per annum, the Class B junior Asset-Backed Notes had an expected weighted-average life to maturity of 3.11 years at issuance and bear interest at 2.22% per annum and the Class C junior Asset-Backed Notes had an expected weighted-average life to maturity of 3.34 years at issuance and bear interest at 2.38% per annum.

Under the terms of the Asset-Backed Notes, there is a two-year revolving period during which we may transfer additional receivables to the ABS Entity.

ABS Financing Facility

As of June 30, 2017, aggregate outstanding borrowings under the ABS Financing Facility were approximately $2.8 billion and $0.3 billion of such amount was drawn down pursuant to a second series loan agreement that was entered into in May 2017. Under both series of the ABS Financing Facility there is a two year revolving period, which may be extended, during which we may transfer additional receivables to the ABS Entity. Subject to certain conditions, we may also remove receivables from the ABS Entity.

Although the ABS Financing Facility is fully drawn as of June 30, 2017, we have the right to prepay all or a portion thereof at any time without penalty, but in certain cases, with breakage costs. If we choose to prepay, the amount prepaid shall be available for further drawdowns until September 2018, except in certain circumstances.

Variable Interest Entities (VIEs)

The ABS Entities meet the definition of a VIE for which we have determined that we are the primary beneficiary as we have both the power to direct the activities of the entity that most significantly impact the entity’s performance and the obligation to absorb losses or the right to receive benefits of the entity. Therefore, the assets, liabilities and activities of the ABS Entities are consolidated in our financial results and are included in amounts presented on the face of our condensed consolidated balance sheets.

The assets and liabilities related to our asset-backed debt arrangements included on our condensed consolidated balance sheets were as follows:


(dollars in millions)	At June 30, 2017		At December 31, 2016
Assets
Account receivable, net	$	6,472	$	3,383
Prepaid expenses and other		396		236
Other assets		3,071		2,383

Liabilities
Accounts payable and accrued liabilities		4		4
Long-term debt		7,869		4,988

See Note 5 for additional information on device payment plan agreement receivables used to secure asset-backed debt.

Credit Facilities

As of June 30, 2017, the unused borrowing capacity under our $9.0 billion credit facility was approximately $8.9 billion. The credit facility does not require us to comply with financial covenants or maintain specified credit ratings, and it permits us to borrow even if our business has incurred a material adverse change. We use the credit facility for the issuance of letters of credit and for general corporate purposes.

As of June 30, 2017, the equipment credit facility insured by Eksportkreditnamnden Stockholm, Sweden (EKN), the Swedish export credit agency, was fully drawn at $1.0 billion. We used this credit facility to finance network equipment-related purchases.

Additional Financing Activities (Non-Cash Transaction)

During the six months ended June 30, 2017, we financed, primarily through alternative financing arrangements, the purchase of approximately $0.2 billion of long-lived assets consisting primarily of network equipment. At June 30, 2017, $1.2 billion relating to these financing arrangements, including those entered into in prior years and liabilities assumed through acquisitions, remained outstanding. These purchases are non-cash financing activities and therefore not reflected within Capital expenditures on our condensed consolidated statements of cash flows.

Early Debt Redemptions

During the first quarter of 2017, we recorded a net pre-tax loss on early debt redemption of $0.8 billion primarily in connection with the January Cash Offers and the March Tender Offer.

We recognize early debt redemption costs in Other expense, net on our condensed consolidated statements of income.

Guarantees

We guarantee the debentures of our operating telephone company subsidiaries. As of June 30, 2017, $1.0 billion aggregate principal amount of these obligations remained outstanding. Each guarantee will remain in place for the life of the obligation unless terminated pursuant to its terms, including the operating telephone company no longer being a wholly-owned subsidiary of Verizon.

We also guarantee the debt obligations of GTE LLC as successor in interest to GTE Corporation that were issued and outstanding prior to July 1, 2003. As of June 30, 2017, $0.8 billion aggregate principal amount of these obligations remain outstanding.