|12 Months Ended|
Dec. 31, 2016
Outstanding debt, net of debt issuance costs, of consolidated entities consisted of the following (dollars in millions):
DIRECT AND SUBSIDIARY DEBT
Huntsman Corporation's direct debt and guarantee obligations consist of a guarantee of certain indebtedness incurred from time to time to finance certain insurance premiums. Substantially all of our other debt, including the facilities described below, has been incurred by our subsidiaries (primarily Huntsman International); Huntsman Corporation is not a guarantor of such subsidiary debt.
Certain of our subsidiaries are designated as nonguarantor subsidiaries and have third-party debt agreements. These debt agreements contain certain restrictions with regard to dividends, distributions, loans or advances. In certain circumstances, the consent of a third party would be required prior to the transfer of any cash or assets from these subsidiaries to us.
Debt Issuance Costs
We record debt issuance costs related to a debt liability on the balance sheet as a reduction in the face amount of that debt liability. As of December 31, 2016 and 2015, the amount of debt issuance costs directly reducing the debt liability was $57 million and $67 million, respectively. We record the amortization of debt issuance costs as interest expense.
Senior Credit Facilities
As of December 31, 2016, our Senior Credit Facilities consisted of our Revolving Facility, our 2015 Extended Term Loan B, our 2021 Term Loan B, and our 2023 Term Loan B as follows (dollars in millions):
On both July 22, 2016 and September 30, 2016, Huntsman International prepaid $100 million of its 2015 Extended Term Loan B. In connection with the $200 million prepayments on our term loan, we recognized a loss on early extinguishment of debt of $1 million. On December 30, 2016, Huntsman International made an early repayment of $260 million on its 2015 Extended Term Loan B using proceeds from the sale of the European surfactants business and existing cash.
Our obligations under the Senior Credit Facilities are guaranteed by substantially all of our domestic subsidiaries and certain of our foreign subsidiaries (collectively, the "Guarantors"), and are secured by a first priority lien on substantially all of our domestic property, plant and equipment, the stock of all of our material domestic subsidiaries and certain foreign subsidiaries, and pledges of intercompany notes between certain of our subsidiaries.
Amendment to the Credit Agreement
On November 15, 2016 Huntsman International entered into a sixteenth amendment to the agreement governing the Senior Credit Facilities ("Credit Agreement"). The amendment provides for a new term loan facility in an aggregate principal amount of $350 million, the 2021 Term Loan B, and a new term loan facility in an aggregate principal amount of $1,375 million, the 2023 Term Loan B. Proceeds of these loans, along with cash on hand, were used to repay in full our 2014 Term Loan B and our 2016 Term Loan B.
The 2021 Term Loan B matures on October 1, 2021 and the 2023 Term Loan B matures on April 1, 2023, provided that the maturity date will accelerate if we do not repay, refinance or have a minimum level of liquidity available to enable us to repay certain of our senior notes upon maturity. The 2021 Term Loan B and 2023 Term Loan B are subject to the same terms and conditions as our existing senior secured term loan facilities.
The margin for borrowing under the 2021 Term Loan B is LIBOR plus 2.75% and the margin for borrowing under the 2023 Term Loan B is LIBOR plus 3.00% and both loans are subject to a 0.75% LIBOR floor. The 2021 Term Loan B and 2023 Term Loan B amortize in amounts equal to 1% of the principal amount, payable quarterly commencing on December 31, 2016.
On April 1, 2016, Huntsman International entered into a fifteenth amendment to the Credit Agreement. The amendment provided for a new term loan facility, the 2016 Term Loan B, to refinance existing term loans pursuant to the Credit Agreement in an aggregate principal amount of $550 million. The net proceeds of the 2016 Term Loan B were used to repay in full Huntsman International's extended term loan B due 2017, our extended term loan B—series 2 due 2017 and our Term Loan C. In connection with these repayments, we recorded a loss on early extinguishment of debt of approximately $2 million in the second quarter of 2016. The 2016 Term Loan B was repaid in full in conjunction with the sixteenth amendment on November 15, 2016.
The fifteenth amendment also extends the stated termination date of our Revolving Facility from March 20, 2017 to March 20, 2021, provided that the maturity date will accelerate if we do not repay, refinance or have a minimum level of liquidity available to enable us to repay our 2015 Extended Term Loan B due 2019 or our senior notes upon their maturity. The amendment further increased the committed amount of our Revolving Facility by $25 million (from $625 million to $650 million). Borrowings under the Revolving Facility bear interest at the same rate as the existing revolving commitments. As of December 31, 2016, we had no borrowings under our Revolving Facility.
On August 10, 2015 we entered into a fourteenth amendment to the Credit Agreement. The amendment increased the interest rate margin with respect to the 2015 Extended Term Loan B to LIBOR plus 3.00%.
Our A/R Programs are structured so that we grant a participating undivided interest in certain of our trade receivables to the U.S. SPE and the EU SPE. We retain the servicing rights and a retained interest in the securitized receivables. Information regarding our A/R Programs as of December 31, 2016 was as follows (monetary amounts in millions):
As of December 31, 2016 and 2015, $437 million and $438 million, respectively, of accounts receivable were pledged as collateral under our A/R Programs.
As of December 31, 2016, we had outstanding the following notes (monetary amounts in millions):
On March 31, 2015, Huntsman International completed a €300 million (approximately $326 million) offering of 2025 Senior Notes. On April 17, 2015, Huntsman International applied the net proceeds of this offering to redeem $289 million ($294 million carrying value) of its 2021 Senior Subordinated Notes.
The 2025 Senior Notes bear interest at 4.25% per year, payable semi-annually on April 1 and October 1, and are due on April 1, 2025. Huntsman International may redeem the 2025 Senior Notes in whole or in part at any time prior to January 1, 2025 at a price equal to 100% of the principal amount thereof plus a "make-whole" premium and accrued and unpaid interest.
The 2020, 2021, 2022 and 2025 Senior Notes are general unsecured senior obligations of Huntsman International and are guaranteed on a general unsecured senior basis by the Guarantors. The indentures impose certain limitations on the ability of Huntsman International and its subsidiaries to, among other things, incur additional indebtedness secured by any principal properties, incur indebtedness of nonguarantor subsidiaries, enter into sale and leaseback transactions with respect to any principal properties and consolidate or merge with or into any other person or lease, sell or transfer all or substantially all of its properties and assets. Upon the occurrence of certain change of control events, holders of the 2020, 2021, 2022 and 2025 Senior Notes will have the right to require that Huntsman International purchase all or a portion of such holder's notes in cash at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest to the date of repurchase.
Redemption of Notes and Loss on Early Extinguishment of Debt
During the year ended December 31, 2015, we redeemed or repurchased the following notes (dollars in millions):
Variable Interest Entity Debt
As of December 31, 2016, AAC, our consolidated 50%-owned joint venture, had $126 million outstanding under its loan commitments and debt financing arrangements. As of December 31, 2016, we have $12 million classified as current debt and $114 million as long-term debt on our consolidated balance sheets. We do not guarantee these loan commitments, and AAC is not a guarantor of any of our other debt obligations.
On July 24, 2015, HPS entered into a financing arrangement to fund the construction of our MDI plant in China. As part of the financing, HPS has secured commitments of a RMB 669 million (approximately $96 million) term loan and a RMB 423 million (approximately $61 million) working capital facility. These facilities are unsecured, and we do not provide a guarantee of these loan commitments. As of December 31, 2016, we had term loan borrowings of RMB111 million (approximately $16 million) and no borrowings under the working capital facility. The interest rate on the facilities is 90% of the Peoples Bank of China rate. As of December 31, 2016, the interest rate was approximately 4%.
HPS also has a loan facility for working capital loans and discounting of commercial drafts. During the year 2016, HPS has repaid RMB 325 million (approximately $47 million) of borrowings under this facility. As of December 31, 2016 HPS had no borrowings outstanding under this facility. Interest is calculated using the Peoples Bank of China rate plus the applicable margin. The average all in rate as of December 31, 2016 was approximately 4%.
Note Payable from Huntsman International to Huntsman Corporation
As of December 31, 2016, we have a loan of $796 million to our subsidiary, Huntsman International. The Intercompany Note is unsecured and $100 million of the outstanding amount is classified as current as of December 31, 2016 on our consolidated balance sheets. As of December 31, 2016, under the terms of the Intercompany Note, Huntsman International promises to pay us interest on the unpaid principal amount at a rate per annum based on the previous monthly average borrowing rate obtained under our U.S. A/R Program, less 10 basis points (provided that the rate shall not exceed an amount that is 25 basis points less than the monthly average borrowing rate obtained for the U.S. LIBOR-based borrowings under our Revolving Facility).
COMPLIANCE WITH COVENANTS
We believe that we are in compliance with the covenants contained in the agreements governing our material debt instruments, including our Senior Credit Facilities, our A/R Programs and our notes.
Our material financing arrangements contain certain covenants with which we must comply. A failure to comply with a covenant could result in a default under a financing arrangement unless we obtained an appropriate waiver or forbearance (as to which we can provide no assurance). A default under these material financing arrangements generally allows debt holders the option to declare the underlying debt obligations immediately due and payable. Furthermore, certain of our material financing arrangements contain cross-default and cross-acceleration provisions under which a failure to comply with the covenants in one financing arrangement may result in an event of default under another financing arrangement.
Our Senior Credit Facilities are the Leverage Covenant which applies only to the Revolving Facility and is calculated at the Huntsman International level. The Leverage Covenant is applicable only if borrowings, letters of credit or guarantees are outstanding under the Revolving Facility (cash collateralized letters of credit or guarantees are not deemed outstanding). The Leverage Covenant is a net senior secured leverage ratio covenant which requires that Huntsman International's ratio of senior secured debt to EBITDA (as defined in the applicable agreement) is not more than 3.75 to 1.
If in the future Huntsman International fails to comply with the Leverage Covenant, then we may not have access to liquidity under our Revolving Facility. If Huntsman International failed to comply with the Leverage Covenant at a time when we had uncollateralized loans or letters of credit outstanding under the Revolving Facility, Huntsman International would be in default under the Senior Credit Facilities, and, unless Huntsman International obtained a waiver or forbearance with respect to such default (as to which we can provide no assurance), Huntsman International could be required to pay off the balance of the Senior Credit Facilities in full, and we may not have further access to such facilities.
The agreements governing our A/R Programs also contain certain receivable performance metrics. Any material failure to meet the applicable A/R Programs' metrics in the future could lead to an early termination event under the A/R Programs, which could require us to cease our use of such facilities, prohibiting us from additional borrowings against our receivables or, at the discretion of the lenders, requiring that we repay the A/R Programs in full. An early termination event under the A/R Programs would also constitute an event of default under our Senior Credit Facilities, which could require us to pay off the balance of the Senior Credit Facilities in full and could result in the loss of our Senior Credit Facilities.
The scheduled maturities of our debt (excluding debt to affiliates) by year as of December 31, 2016 are as follows (dollars in millions):
The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.
Reference 1: http://www.xbrl.org/2003/role/presentationRef