| DEBT | The following table summarizes Ashland’s current and long-term debt at September 30, 2017 and 2016 . (In millions) 2017 2016 4.750% notes, due 2022 $ 1,082 $ 1,121 Term Loan B, due 2024 599 — 6.875% notes, due 2043 376 376 Term Loan A, due 2022 250 — Term Loan A, due 2020 250 — Revolving Credit Facility 173 — Accounts receivable securitization 56 — 6.50% junior subordinated notes, due 2029 51 140 Other international loans — 20 Medium-term notes, due 2019, interest of 9.4% at September 30, 2016 5 5 Term Loan, due 2017 — 150 3.875% notes, due 2018 — 700 Other (a) (23 ) (17 ) Total debt 2,819 2,495 Short-term debt (includes current portion of long-term debt) (235 ) (170 ) Long-term debt (less current portion and debt issuance costs) $ 2,584 $ 2,325 (a) Other includes $25 million and $20 million of debt issuance costs as of September 30, 2017 and 2016 , respectively. At September 30, 2017 , Ashland’s total debt had an outstanding principal balance of $2,897 million , discounts of $53 million and debt issuance costs of $25 million . The scheduled aggregate maturities of long-term debt for the next five fiscal years (including the current portion and excluding debt issuance costs) are as follows: $6 million in 2018 , $11 million in 2019 , $269 million in 2020 , $56 million in 2021 and $1,279 million in 2022 . Credit Agreements and Refinancing 2017 Credit Agreement On May 17, 2017, in conjunction with the closing of the Pharmachem acquisition, Ashland entered into a secured credit agreement (the 2017 Credit Agreement) with a group of lenders. The 2017 Credit Agreement provided for (i) a $250 million three-year term loan A facility (the Three-Year TLA Facility), (ii) a $250 million five-year term loan A facility (the Five-Year TLA Facility and together with the Three-Year TLA Facility, the TLA Facilities) and (iii) a $680 million five-year revolving credit facility (including a $125 million letter of credit sublimit) (the 2017 Revolving Credit Facility). Proceeds of borrowings under the TLA Facilities were used solely to finance the acquisition of Pharmachem, while the proceeds of the 2017 Revolving Credit Facility were used to finance, in part, the acquisition of Pharmachem, to refinance the 2015 Senior Credit Agreement and for general corporate purposes. On May 19, 2017, Ashland entered into Amendment No. 1 to the 2017 Credit Agreement, which increased the aggregate commitments under the 2017 Revolving Credit Facility from $680 million to $800 million . At Ashland’s option, loans issued under the 2017 Credit Agreement bear interest at either LIBOR or an alternate base rate, in each case plus the applicable interest rate margin. Loans bear interest at LIBOR plus 1.75% per annum, in the case of LIBOR borrowings, or at the alternate base rate plus 0.75% , in the alternative, through and including the date of delivery of a quarterly compliance certificate and thereafter the interest rate will fluctuate between LIBOR plus 1.375% per annum and LIBOR plus 2.500% per annum (or between the alternate base rate plus 0.375% per annum and the alternate base rate plus 1.500% per annum), based upon Ashland’s secured facilities ratings or the consolidated net leverage ratio (as defined in the 2017 Credit Agreement) (whichever yields a lower applicable interest rate margin) at such time. In addition, Ashland was required to pay fees of 0.25% per annum on the daily unused amount of the 2017 Revolving Credit Facility through and including the date of delivery of a compliance certificate, and thereafter the fee rate will fluctuate between 0.175% and 0.40% per annum, based upon Ashland’s secured facilities rating or the consolidated net leverage ratio (whichever yields a lower applicable rate). The TLA Facilities may be prepaid at any time without premium. The Three-Year TLA Facility will not amortize and will be due on May 17, 2020. The Five-Year TLA Facility will not amortize in each of the first, second and third years and will amortize at a rate of 20% per annum in each of the fourth and fifth years (payable in equal quarterly installments), with the outstanding balance of the Five-Year TLA Facility to be paid on May 17, 2022. On June 14, 2017, Ashland entered into Amendment No. 2 to the 2017 Credit Agreement, which provided for a new $600 million seven-year senior secured term loan B facility (the 2017 TLB Facility). At Ashland’s option, loans issued under the 2017 TLB Facility bear interest at either (x) LIBOR plus 2.00% per annum or (y) an alternate base rate plus 1.00% per annum. The 2017 TLB Facility may be prepaid at any time, subject to a prepayment premium if the prepayment is made on or prior to December 14, 2017 in connection with a Repricing Transaction (as defined in the 2017 Credit Agreement). The 2017 TLB Facility amortizes at a rate of 1.00% per annum (payable in equal quarterly installments) with the outstanding balance to be paid on May 17, 2024. Ashland incurred $15 million of new debt issuance costs in connection with the 2017 Credit Agreement, of which $2 million was expensed immediately during 2017 within the net interest and other financing expense caption of the Statements of Consolidated Comprehensive Income. The remaining balance is amortized using the effective interest method. Additionally, as a result of the termination of the 2015 Senior Credit Agreement, Ashland recognized a $5 million charge for the accelerated amortization of previously capitalized debt issuance costs during 2017, which is included in the net interest and other financing expense caption of the Statements of Consolidated Comprehensive Income. The credit facilities under the 2017 Credit Agreement are guaranteed by Ashland Global Holdings Inc., Ashland Chemco Inc. and Ashland LLC's existing and future subsidiaries (other than certain immaterial subsidiaries, joint ventures, special purpose financing subsidiaries, regulated subsidiaries, foreign subsidiaries and certain other subsidiaries) and are secured by a first-priority security interest in substantially all of the personal property assets of Ashland and the guarantors, including all or a portion of the equity interests of certain of Ashland’s domestic subsidiaries and first-tier foreign subsidiaries and, in certain cases, a portion of the equity interests of other foreign subsidiaries. The guarantees by Ashland’s subsidiaries and pledge of security interests by such guarantors may, at Ashland’s option, be released upon and during the occurrence of a Collateral Release Event (as defined in the 2017 Credit Agreement). Senior notes refinancing, 2015 Senior Credit Agreement and 2016 Amendment During June of 2015, Ashland completed certain refinancing transactions related to the $600 million 3.000% senior notes due in 2016 (2016 Senior Notes). Ashland commenced and completed a cash tender offer to purchase for cash any and all of its outstanding 2016 Senior Notes. At the close of the tender offer, $550 million aggregate principal amount of the 2016 Senior Notes was tendered by note holders, representing approximately 92% of the outstanding 2016 Senior Notes, which have been purchased by Ashland. Subsequently, Ashland redeemed the remaining balance of the 2016 Senior Notes of $50 million on July 23, 2015. In connection with the tender offer and redemption, in June 2015, Ashland entered into a new Credit Agreement (the 2015 Senior Credit Agreement). The 2015 Senior Credit Agreement replaced the $1.2 billion senior unsecured revolving credit facility (the 2013 Senior Credit Facility), and was comprised of a new five-year senior unsecured revolving credit facility in an aggregate amount of $1.2 billion (the 2015 Revolving Credit Facility), which included a $250 million letter of credit sublimit and a $100 million swing line loan sublimit, and a five-year senior unsecured term loan facility in an aggregate principal amount of $1.1 billion (the 2015 term loan facility). The 2015 Senior Credit Agreement was not guaranteed, was unsecured and could be prepaid at any time without premium or penalty. At Ashland’s option, borrowings under the 2015 Revolving Credit Facility bore interest at either LIBOR or an alternate base rate, in each case plus the applicable interest rate margin. The loans’ interest rate fluctuated between LIBOR plus 1.375% per annum and LIBOR plus 2.50% per annum (or between the alternate base rate plus 0.375% per annum and the alternate base rate plus 1.50% per annum), based upon Ashland’s corporate credit ratings or the consolidated gross leverage ratio (as defined in the 2015 Senior Credit Agreement) (whichever yields a lower applicable interest rate margin) at such time. In addition, Ashland was required to pay fees of 0.25% per annum on the daily unused amount of the 2015 Revolving Credit Facility through and including June 30, 2015, and thereafter the fee rate fluctuated between 0.175% and 0.40% per annum, based upon Ashland’s corporate credit ratings or the consolidated gross leverage ratio (whichever yields a lower fee rate). During 2015, Ashland used the proceeds from borrowings under the $1.1 billion term loan facility along with cash on hand (i) to fund the tender offer of the 2016 Senior Notes, (ii) to prepay in full the outstanding loans under the 2013 Senior Credit Facility, (iii) to pay accrued interest, fees and expenses under the 2013 Senior Credit Facility and the 2016 Senior Notes, (iv) to contribute funds to the U.S. pension plans impacted by the pension plan settlement program, and (v) to pay fees and expenses incurred in connection with the entry into the 2015 Senior Credit Agreement. As a result of the tender offer and redemption, Ashland recognized a $9 million charge related to early redemption premium payments, which is included in the net interest and other financing expense caption of the Statements of Consolidated Comprehensive Income (Loss) in 2015. Ashland incurred $10 million of new debt issuance costs in connection with the 2015 Senior Credit Agreement, of which $2 million was expensed immediately during 2015 within the net interest and other financing expense caption of the Statements of Consolidated Comprehensive Income. The remaining balance was amortized over the term of the 2015 Senior Credit Agreement using the effective interest method. Additionally, as a result of the termination of the 2013 Senior Credit Facility and the repayment of the 2016 Senior Notes, Ashland recognized a $2 million charge during 2015 for the accelerated amortization of previously capitalized debt issuance costs, which is included in the net interest and other financing expense caption of the Statements of Consolidated Comprehensive Income. During July 2016, Ashland amended the 2015 Senior Credit Agreement to permit the Reorganization and the series of events relating to the separation of Valvoline Inc. Additionally, the amendment provided that if the aggregate principal amount of the Valvoline debt reaches $750 million , Ashland would be required to use the net proceeds of such borrowings to repay the 2015 term loan facility and/or permanently reduce its existing revolving credit commitments under the 2015 Senior Credit Agreement in an aggregate amount of up to $1 billion . As a result of the July 2016 amendment and the Valvoline debt borrowings in connection with the separation, Ashland reduced its revolving borrowing capacity to $800 million . The 2015 Term Loan Facility balance was repaid in full in connection with the combined Ashland and Valvoline financing activities during September 2016. In connection with these transactions, Ashland recognized a $6 million charge for the accelerated amortization of previously capitalized debt issuance costs, which is included in the net interest and other financing expense caption of the Statements of Consolidated Comprehensive Income (Loss) in 2016. Other Financing Activities Redemption of 3.875% notes due 2018 In connection with the 2017 TLB Facility, Ashland redeemed all of its outstanding 3.875% senior notes due 2018 (2018 Senior Notes), of which approximately $659 million were outstanding. Proceeds of borrowings under the 2017 TLB Facility, together with cash on hand, were used to pay for the redemption. Ashland recognized a $13 million charge related to premiums paid and accelerated amortization of previously capitalized debt issuance costs during 2017, which is included in the net interest and other financing expense caption of the Statement of Consolidated Comprehensive Income. Open market repurchases of 4.750% notes due 2022 and 3.875% notes due 2018 During 2017, Ashland executed open market repurchases of its 4.750% notes due 2022 (2022 Senior Notes) and its 3.875% notes due 2018 (2018 Senior Notes). As a result of these repurchases, the carrying values of the 2022 and 2018 Senior Notes were reduced by $39 million and $41 million , respectively. Ashland recognized a $3 million charge related to premiums paid in the open market repurchases and accelerated amortization of previously capitalized debt issuance costs during 2017, which is included in the net interest and other financing expense caption of the Statement of Consolidated Comprehensive Income. As previously discussed, the remaining outstanding amount of the 2018 Senior Notes was redeemed during 2017. 6.50% junior subordinated notes due 2029 In December 2016, Hercules, an indirect wholly-owned subsidiary of Ashland, repurchased, through a cash tender offer, $182 million of the aggregate principal par value amount of its 6.50% junior subordinated notes due 2029 (2029 Notes) for an aggregate purchase price of $177 million . As a result, the carrying value of the 2029 Notes was reduced by $90 million and Ashland recognized a $92 million charge related to accelerated accretion of the recorded debt discount (compared to the total par value) and $5 million of a net gain related to the repayment of the debt during 2017. The charge and net gain are included in the net interest and other financing expense caption of the Statement of Consolidated Comprehensive Income. Accounts receivable securitization On August 31, 2012, Ashland entered into a $350 million accounts receivable securitization facility pursuant to (i) a Sale Agreement, among Ashland and certain of its direct and indirect subsidiaries (each an Originator and collectively, the Originators) and CVG Capital III LLC, a wholly-owned “bankruptcy remote” special purpose subsidiary of the Originators (CVG) and (ii) a Transfer and Administration Agreement, among CVG, each Originator, Ashland, as Master Servicer, certain Conduit Investors, Uncommitted Investors, Letter of Credit Issuers, Managing Agents, Administrators and Committed Investors, and The Bank of Nova Scotia, as agent for various secured parties (the Agent). The Transfer and Administration Agreement had a term of three years, but was extendable at the discretion of Ashland and the Investors. During 2016, the termination date of the commitments under the Transfer and Administration Agreement was extended from December 31, 2015, the previous termination extension date, to March 22, 2017. During the March 2017 quarter, this facility was extended for an additional year with similar terms as the previous facility agreement. Under the Sale Agreement, each Originator will transfer, on an ongoing basis, certain of its accounts receivable, certain related assets and the right to the collections on those accounts receivable to CVG. Under the terms of the Transfer and Administration Agreement, CVG could, from time to time, obtain up to $350 million (in the form of cash or letters of credit for the benefit of Ashland and its subsidiaries) from the Conduit Investors, the Uncommitted Investors and/or the Committed Investors through the sale of an undivided interest in such accounts receivable, related assets and collections. Subsequently during 2014 and 2015, the available funding for qualifying receivables under the accounts receivable securitization facility was reduced from $350 million to $275 million during 2014 and from $275 million to $250 million during 2015 due to the divestitures that occurred during the fiscal years. The accounts receivable securitization facility was reduced from $250 million to $100 million when Valvoline was removed as an Originator as part of the combined Ashland and Valvoline financing activities in September 2016. Ashland accounts for the securitization facility as secured borrowings, and the receivables sold pursuant to the facility are included in the Consolidated Balance Sheets as accounts receivable. Fundings under the Transfer and Administration Agreement will be repaid as accounts receivable are collected, with new fundings being advanced (through daily reinvestments) as new accounts receivable are originated by the Originators and transferred to CVG, with settlement generally occurring monthly. Ashland continues to classify any borrowings under this facility as a short-term debt instrument within the Consolidated Balance Sheets. Once sold to CVG, the accounts receivable, related assets and rights to collection described above are separate and distinct from each Originator’s own assets and are not available to its creditors should such Originator become insolvent. Substantially all of CVG’s assets have been pledged to the Agent in support of its obligations under the Transfer and Administration Agreement. At September 30, 2017 and 2016 , the outstanding amount of accounts receivable transferred by Ashland to CVG was $155 million and $133 million , respectively. There were $56 million of borrowings under the facility as of September 30, 2017 , while Ashland had no borrowings under the facility as of September 30, 2016. The weighted-average interest rate for this instrument was 2.8% for 2017 and 1.5% for 2016 . Subsidiary senior unsecured term loan During August 2016, a wholly owned foreign subsidiary of Ashland entered into a credit agreement which provided for an aggregate principal amount of $150 million in a senior unsecured term loan facility that matured on February 15, 2017. This term loan was drawn in full as of September 30, 2016 and was fully repaid during 2017. Other debt At September 30, 2017 and 2016 , Ashland held other debt totaling $58 million and $168 million , respectively, comprised primarily of the 6.50% notes due 2029, other short-term international loans and a medium-term note. Remaining borrowing capacity The borrowing capacity remaining under the 2017 Revolving Credit Facility was $579 million due to an outstanding balance of $173 million , as well as a reduction of $48 million for letters of credit outstanding at September 30, 2017 . Ashland's total borrowing capacity at September 30, 2017 was $614 million , which included $35 million of available capacity under the accounts receivable securitization facility. Covenants related to current Ashland debt agreements Ashland’s debt contains usual and customary representations, warranties and affirmative and negative covenants, including financial covenants for leverage and interest coverage ratios, limitations on liens, additional subsidiary indebtedness, restrictions on subsidiary distributions, investments, mergers, sale of assets and restricted payments and other customary limitations. As of September 30, 2017 , Ashland was in compliance with all debt agreement covenant restrictions. The maximum consolidated net leverage ratio permitted under Ashland’s most recent credit agreement (the 2017 Credit Agreement) is 4.50 . The 2017 Credit Agreement defines the consolidated net leverage ratio as the ratio of consolidated indebtedness minus unrestricted cash and cash equivalents to consolidated EBITDA (Covenant Adjusted EBITDA) for any measurement period. In general, the 2017 Credit Agreement defines Covenant Adjusted EBITDA as net income plus consolidated interest charges, taxes, depreciation and amortization expense, fees and expenses related to capital market transactions and proposed or actual acquisitions and divestitures, restructuring and integration charges, noncash stock and equity compensation expense, and any other nonrecurring expenses or losses that do not represent a cash item in such period or any future period; less any noncash gains or other items increasing net income. The computation of Covenant Adjusted EBITDA differs from the calculation of EBITDA and Adjusted EBITDA, which have been reconciled on page M-7. In general, consolidated indebtedness includes debt plus all purchase money indebtedness, banker’s acceptances and bank guaranties, deferred purchase price of property or services, attributable indebtedness and guarantees. The minimum required consolidated interest coverage ratio under the 2017 Credit Agreement during is 3.0 . The 2017 Credit Agreement defines the consolidated interest coverage ratio as the ratio of Covenant Adjusted EBITDA to consolidated interest charges for any measurement period. At September 30, 2017 , Ashland’s calculation of the consolidated net leverage ratio was 3.8 , which is below the maximum consolidated net leverage ratio permitted under the 2017 Credit Agreement of 4.50 . At September 30, 2017 , Ashland’s calculation of the consolidated interest coverage ratio was 4.7 , which exceeds the minimum required consolidated ratio of 3.0 . Guarantee of Senior Notes Ashland Global Holdings Inc. was incorporated on May 6, 2016 as a direct wholly owned subsidiary of Ashland Inc. (now Ashland LLC) to reincorporate in Delaware and to help facilitate the separation of the Valvoline business from the specialty chemical businesses. As a result of the Reorganization, Ashland Global Holdings Inc. replaced Ashland Inc. as the publicly held corporation, and Ashland Inc. was converted to a Kentucky limited liability company and is now an indirect, wholly owned subsidiary of Ashland Global Holdings Inc. Ashland Global Holdings Inc. fully and unconditionally guaranteed the 3.875% notes due 2018 (which were fully repaid during the current year), 4.750% notes due 2022 and 6.875% notes due 2043 (collectively referred to as the Senior Notes) and has no significant independent assets or operations. For periods prior to September 30, 2016, the parent entity was Ashland LLC (formerly Ashland Inc.). On October 20, 2016, Ashland received the requisite consents with respect to its consent solicitation from the holders of the Senior Notes to certain amendments to the reporting covenants in the indentures governing the Senior Notes. Following receipt of the consents, Ashland LLC, as issuer, Ashland Global Holdings Inc. and the trustee, entered into two supplemental indentures that (1) modified the applicable reporting covenants contained in the indentures governing the Senior Notes to provide that so long as any parent entity of Ashland LLC guarantees the Senior Notes, the reports, information and other documents required to be filed and furnished to holders of the Notes pursuant to the applicable indenture may, at the option of Ashland LLC, be filed by and be those of such parent entity rather than Ashland LLC and (2) provided for the guarantee of the Senior Notes by Ashland. Subsequent to the final distribution of Valvoline Inc. during May 2017, there were no longer any significant subsidiaries of Ashland Global Holdings Inc. other than the subsidiary issuer (Ashland LLC). As a result, Ashland is no longer required to provide condensed consolidated financial information for Ashland Global Holdings Inc., Ashland LLC and all other non-guarantor subsidiaries. Net interest and other financing expense (income) (In millions) 2017 2016 2015 Interest expense (a) $ 232 $ 180 $ 166 Interest income (4 ) (5 ) (6 ) Available-for-sale securities income (b) (11 ) (8 ) (3 ) Other financing costs (c) 17 6 17 $ 234 $ 173 $ 174 (a) Includes $101 million , $6 million and $4 million of accelerated accretion and/or amortization for original issue discounts and debt issuance costs during 2017 , 2016 and 2015 , respectively. (b) Represents investment income related to the restricted investments discussed in Note G. (c) Includes costs of $14 million related to early redemption premium payments of the 2022 and 2018 Senior Notes and a net gain of $5 million related to the repayment of the 2029 Notes during 2017. Includes costs of $9 million related to early redemption premium payments for the tender and redemption of the 2016 Senior Notes during 2015. The following table details the debt issuance cost and original issue discount amortization included in interest expense during 2017 , 2016 and 2015 . (In millions) 2017 2016 2015 Normal amortization $ 8 $ 12 $ 14 Accelerated amortization (a) 101 6 4 Total $ 109 $ 18 $ 18 (a) Fiscal year 2017 includes $92 million of accelerated accretion of the recorded debt discount for the 2029 Notes, while the remaining amounts in each year relate to accelerated amortization of debt issuance costs. |
