Debt and Other Financing Arrangements

Long-Term Debt

A summary of the Company's long-term debt obligations at December 31, 2018 and 2017, is set forth in the following table:



	2018						2017
	Principal		Carrying Amount⁽¹⁾		Effective Interest Rate		Principal		Carrying Amount⁽¹⁾		Effective Interest Rate
	(Millions)
Credit Facilities
Revolver Borrowings
Due 2023	$	—	$	—	—		$	244	$	244
Term Loans
LIBOR plus 1.75% Term Loan A due 2019 through 2023⁽²⁾	1,700		1,691		6.160	%	—		—		—
LIBOR plus 2.75% Term Loan B due 2019 through 2025⁽³⁾	1,700		1,629		8.880	%	—		—		—
Senior Tranche A Term Loan	—		—		—		390		388		2.900	%
Senior Unsecured Notes
$225 million of 5.375% Senior Notes due 2024⁽⁴⁾	225		222		5.609	%	225		222		5.609	%
$500 million of 5.000% Senior Notes due 2026⁽⁵⁾	500		493		5.219	%	500		492		5.219	%
Senior Secured Notes⁽⁹⁾
€415 million 4.875% Euro Fixed Rate Notes due 2022⁽⁶⁾	476		496		3.599	%	—		—		—
€300 million of Euribor plus 4.875% Euro Floating Rate Notes due 2024⁽⁷⁾	344		349		4.620	%	—		—		—
€350 million of 5.000% Euro Fixed Rate Notes due 2024⁽⁸⁾	401		427		3.823	%	—		—		—
Other Debt, primarily foreign instruments	108		106				17		15
			5,413						1,361
Less — maturities classified as current			73						3
Total long-term debt			$	5,340					$	1,358

(1)Carrying amount is net of unamortized debt issuance costs and debt discounts or premiums. Total unamortized debt issuance costs were $90 million and $13 million as of December 31, 2018 and 2017. Total unamortized debt (premium) discount, net was $(49) million and $2 million as of December 31, 2018 and 2017.

(2) Principal and interest payable in 19 consecutive quarterly installments beginning March 31, 2019, with $21 million being paid quarterly in the seven quarters, followed by $32 million paid in the subsequent four quarters followed by $43 million in the subsequent eight quarters and the remainder at maturity.

(3) Principal and interest payable in 27 consecutive quarterly installments beginning March 31, 2019 with $4 million paid quarterly and the remainder at maturity.

(4) Interest payable semiannually beginning on June 30, 2015 with principal due at maturity.

(5) Interest payable semiannually beginning on January 31, 2017 with principal due at maturity.

(6) Interest is payable quarterly on April 15 and October 15 of each year with principal due at maturity.

(7) Interest accrues at the three-month EURIBOR rate (with 0% floor) plus 4.875% per annum and payable quarterly on January 15, April 15, July 15 and October 15.

(8) Interest payable semiannually on January 15 and July 15 of each year beginning on July 17, 2017 with principal due at maturity.

(9) Rank equally in right of payment to all indebtedness under the New Credit Facility (as subsequently defined).

The Company has excluded the required payments, within the next twelve months, under the Term Loan A and Term Loan B facilities totaling $85 million and $17 million, respectively, from current liabilities as of December 31, 2018, because the Company has the intent and ability to refinance the obligations on a long-term basis by using its revolving credit facility.

The aggregate maturities applicable to the long-term debt outstanding at December 31, 2018:



	Aggregate Maturities
	(Millions)
2019	$	175
2020	$	114
2021	$	154
2022	$	692
2023	$	1,249

Interest expense associated with the amortization of the debt issuance costs and original issue discounts recognized in the Company's consolidated statements of income consists of the following:



	2018		2017		2016
	(Millions)
Amortization of debt issuance fees	$	8	$	4	$	4

Included in the table above, is the amortization of debt issuance costs on the revolver. These are $9 million at December 31, 2018 and are recorded in "Prepayments and other current assets." As a result of the Acquisition, the Senior Secured Notes listed in the table were acquired at fair value, which resulted in recognizing a debt premium of $54 million on these notes, of which $3 million was recognized as interest income during the year ended December 31, 2018.

Short-Term Debt

The Company's short-term debt as of December 31, 2018 and 2017 is as follows:



	At December 31
	2018		2017
	(Millions)
Maturities classified as current	$	73	$	3
Short-term borrowings^(a)	66		80
Bank overdrafts	14		20
Total short-term debt	$	153	$	103



Weighted average interest rate on outstanding short-term borrowings at end of year	4.4	%	2.9	%


(a)	Includes borrowings under both committed credit facilities and uncommitted lines of credit and similar arrangements.

Credit Facilities

Financing Arrangements



	Committed Credit Facilities^(a) as of December 31, 2018
	Term	Commitments		Borrowings		Letters of Credit^(b)		Available
	(Millions)
Tenneco Inc. revolving credit agreement	2023	$	1,500	$	—	$	24	$	1,476
Tenneco Inc. Term Loan A	2023	1,700		1,700		—		—
Tenneco Inc. Term Loan B	2025	1,700		1,700		—		—
Subsidiaries’ credit agreements	2018-2028	154		51		3		100
		$	5,054	$	3,451	$	27	$	1,576


(a)	The Company generally is required to pay commitment fees on the unused portion of the total commitment.


(b)	Letters of credit reduce the available borrowings under the revolving credit agreement.

On October 1, 2018, the Company entered into a new credit agreement with JPMorgan Chase Bank, N.A., as administrative agent and other lenders (the “ New Credit Facility”) in connection with the acquisition of Federal-Mogul. The New Credit Facility consists of $4.9 billion of total debt financing, consisting of a five-year $1.5 billion revolving credit facility, a five-year $1.7 billion term loan A facility ("Term Loan A") and a seven-year $1.7 billion term loan B facility ("Term Loan B"). Proceeds from the New Credit Facility were used to finance the cash consideration portion of the Acquisition purchase price, to refinance the Company’s then existing senior credit facilities inclusive of the revolver and the tranche A term loan then outstanding (the "Old Credit Facility"), certain senior credit facilities of Federal-Mogul, and to pay fees and expenses relating to the Acquisition and the financing thereof. The remainder, including future borrowings under the revolving credit facility, will be used for general corporate purposes.

The Company and Tenneco Automotive Operating Company Inc., a wholly-owned subsidiary, are borrowers under the New Credit Facility, and the Company is the sole borrower under the Term Loan A and Term Loan B facilities. The New Credit Facility is guaranteed on a senior basis by certain material domestic subsidiaries of the Company. Drawings under the revolving credit facility may be in U.S. dollars, British pounds or euros.

The New Credit Facility is secured by substantially all domestic assets of the Company, the subsidiary guarantors, and by pledges of up to 66% of the stock of certain first-tier foreign subsidiaries. The security for the New Credit Facility is pari passu with the security for the outstanding senior secured notes of Federal-Mogul that were assumed by the Company in connection with the Acquisition. If any foreign subsidiary of the Company is added to the revolving credit facility as a borrower, the obligations of such foreign borrower will be secured by the assets of such foreign borrower, and also will be secured by the assets of, and guaranteed by, the domestic borrowers and domestic guarantors as well as certain foreign subsidiaries of the Company in the chain of ownership of such foreign borrower.

As a result of the refinancing of the revolving credit agreement and tranche A term loan under the Old Credit Facility, the Company recorded a loss on extinguishment of debt of $10 million for the year-ended December 31, 2018, primarily consisting of debt issuance costs incurred at the transaction date and write-off of deferred debt issuance costs related to the refinanced revolving credit loan and tranche A term loan. The Company also recorded $1 million of loss on extinguishment of debt for the year ended December 31, 2017 related to amendment and restatement of the Old Credit Facility and the write-off of deferred debt issuance costs related to the Old Credit Facility. The Company recorded a $24 million loss on extinguishment of debt for the year ended December 31, 2016 for the repurchase and redemption of senior notes due 2020 and the write-off of debt issuance costs relating to those notes.

New Credit Facility — Interest Rates and Fees

The interest rate on borrowings under the revolving credit facility and the Term Loan A facility will initially be LIBOR plus 1.75%, which interest rate will be subject to change if the Company’s consolidated net leverage ratio changes. Initially, and so long as the Company’s corporate family rating is Ba3 (with a stable outlook) or higher from Moody’s Investors Service, Inc. (“Moody’s”) and BB- (with a stable outlook) or higher from Standard & Poor’s Financial Services LLC (“S&P”), the interest rate on borrowings under the Term Loan B facility will be LIBOR plus 2.75%; at any time the foregoing conditions are not satisfied, the interest rate on the Term Loan B facility will be LIBOR plus 3.00%. When the Term Loan B facility is no longer outstanding and the Company and its subsidiaries have no other secured indebtedness (with certain exceptions set forth in the New Credit Facility), and upon the Company achieving and maintaining two or more corporate credit and/or corporate family ratings higher than or equal to BBB- from S&P, BBB- from Fitch Ratings Inc. (“Fitch”) and/or Baa3 from Moody’s (in each case, with a stable or positive outlook), the collateral under the New Credit Facility may be released.

New Credit Facility — Other Terms and Conditions

The New Credit Facility contains representations and warranties, and covenants which are customary for debt facilities of this type. The covenants limit the ability of the Company and its restricted subsidiaries to, among other things, to (i) incur additional indebtedness or issue preferred stock, (ii) pay dividends or make distributions to the Company’s stockholders, (iii) purchase or redeem the Company’s equity interests, (iv) make investments, (v) create liens on their assets, (vi) enter into transactions with the Company’s affiliates, (vii) sell assets and (viii) merge or consolidate with, or dispose of substantially all of the Company’s assets to, other companies.

The New Credit Facility includes customary events of default and other provisions that could require all amounts due thereunder to become immediately due and payable, either automatically or at the option of the lenders, if the Company fails to comply with the terms of the New Credit Facility or if other customary events occur.

The New Credit Facility also contains two financial maintenance covenants for the revolving credit facility and the Term Loan A facility including a requirement to have a consolidated net leverage ratio (as defined in the New Credit Facility) as of the end of each fiscal quarter of not greater than 4.0 to 1 through September 30, 2019, 3.75 to 1 through September 30, 2020 and 3.5 to 1 thereafter; and a requirement to maintain a consolidated interest coverage ratio (as defined in the New Credit Facility) for any period of four consecutive fiscal quarters of not less than 2.75 to 1.

The covenants in the New Credit Facility generally prohibit the Company from repaying or refinancing its senior unsecured notes. So long as no default exists, the Company would, under its New Credit Facility, be permitted to repay or refinance our senior unsecured notes (i) with the net cash proceeds of permitted refinancing indebtedness (as defined in the New Credit Facility); (ii) in an amount equal to the net cash proceeds of qualified capital stock (as defined in the New Credit Facility) issued after October 1, 2018 and (iii) in exchange for qualified capital stock issued after October 1, 2018; and (iv) with additional payments provided that such additional payments are capped as follows based on a pro forma consolidated leverage ratio after giving effect to such additional payments.

As of December 31, 2018, the Company was in compliance with all the financial covenants of the New Credit Facility.

Senior Notes

Senior Unsecured Notes

The Company has outstanding 5.375% senior unsecured notes due December 15, 2024 ("2024 Senior Notes") and 5.000% senior unsecured notes due July 15, 2026 ("2026 Senior Notes" and together with the 2024 Senior Notes, the “Senior Unsecured Notes”) at December 31, 2018. The Company is permitted to redeem some or all of the outstanding Senior Unsecured Notes, at specified redemption prices that decline to par over a specified period, at any time (a) on or after December 15, 2019, in the case of the 2024 Senior Notes and (b) on or after July 15, 2021, in the case of the 2026 Senior Notes. In addition, the Senior Unsecured Notes may also be redeemed at a price generally equal to 100% of the principal amount thereof plus a premium based on the present values of the remaining payments due to the note holders. Further, the Company may redeem up to 35% of each Senior Unsecured Notes with the proceeds of certain equity offerings on or before July 15, 2019 at a redemption price equal to 105%, in the case of the 2026 Senior Notes.

If the Company experiences specified kinds of changes in control, the Company must offer to repurchase the Senior Unsecured Notes at 101% of the principal amount thereof plus accrued and unpaid interest. In addition, if the Company sells certain of its assets and does not apply the proceeds from the sale in a certain manner within 365 days of the sale, the Company must offer to repurchase the 2024 Senior Notes at 100% of the principal amount thereof plus accrued and unpaid interest.

Senior Secured Notes

In connection with the Acquisition of Federal-Mogul on October 1, 2018, the Company assumed an aggregate principal amount of €350 million ($401 million) 5.000% euro denominated fixed rate notes which are due July 15, 2024 ("5.000% Euro Fixed Rate Notes"), €415 million ($476 million) 4.875% euro denominated fixed rate notes due April 15, 2022 ("4.875% Euro Fixed Rate Notes"), and an aggregate principal amount of €300 million ($344 million) floating rate notes due April 15, 2024 ("Euro Floating Rate Notes" and together with the 5.000% Euro Fixed Rate Notes and the 4.875% Euro Fixed Rate Notes, the “Senior Secured Notes”).

The Company is permitted to redeem some or all of the outstanding Senior Secured Notes at specified redemption prices that decline to par over a specified period, at any time (a) on or after July 15, 2020, in the case of the 5.000% Euro Fixed Rate Notes, (b) on or after April 15, 2019, in the case of the 4.875% Euro Fixed Rate Notes and (c) on or after April 15, 2018, in the case of the Euro Floating Rate Notes. In addition, the Senior Secured Notes may also be redeemed at a price generally equal to 100% of the principal amount thereof plus a premium based on the present values of the remaining payments due to the note holders. Further, the Company may also redeem up to 40% of the 5.000% Euro Fixed Rate Notes and the 4.875% Euro Fixed Rate Notes with the proceeds of certain equity offerings at any time prior to (a) July 15, 2020 at a redemption price of 105.0% in the case of the 5.000% Euro Fixed Rate Notes, and (b) April 15, 2019 at a redemption price of 104.875% in the case of the 4.875% Euro Fixed Rate Notes.

If the Company experiences specified kinds of changes in control, the Company must offer to repurchase the Senior Secured Notes at 101% of the principal amount thereof plus accrued and unpaid interest. In addition, if the Company sells certain of its assets and does not apply the proceeds from the sale in a certain manner within 365 days of the sale, the Company must offer to repurchase the Senior Secured Notes at 100% of the principal amount thereof plus accrued and unpaid interest.

The Company has designated a portion of the Senior Secured Notes as a net investment hedge of its European operations. As such, the fluctuations in foreign currency exchange rates on the value of the Senior Secured Notes is recorded to cumulative translation adjustment. See Note 9, Derivatives and Hedging Activities for further details.

Senior Unsecured Notes and Senior Secured Notes - Other Terms and Conditions

The Senior Unsecured Notes and Senior Secured Notes contain covenants that will, among other things, limit the Company's ability to create liens and enter into sale and leaseback transactions. In addition, the Senior Secured Notes and 2024 Unsecured Senior Notes also require that, as a condition precedent to incurring certain types of indebtedness not otherwise permitted, our consolidated fixed charge coverage ratio, as calculated on a pro forma basis, be greater than 2.00, as well as containing restrictions on its operations, including limitations on: (i) incurring additional indebtedness; (ii) paying dividends; (iii) distributions and stock repurchases; (iv) investments; (v) asset sales and (vi) mergers and consolidations.

Subject to limited exceptions, all of the Company's existing and future material domestic wholly owned subsidiaries fully and unconditionally guarantee its Senior Unsecured Notes and Senior Secured Notes on a joint and several basis. There are no significant restrictions on the ability of the subsidiaries that have guaranteed the Company's Senior Notes to make distributions to the Company.

Other Debt

Other debt consists primarily of foreign debt with maturities of one year or less.

Accounts Receivable Securitization and Factoring

On-Balance Sheet Arrangements

The Company has securitization programs for some of its accounts receivable, with limited recourse provisions. Borrowings on these securitization programs are recorded in short-term debt.

Borrowings on these securitization programs at December 31, 2018 and 2017 are as follows:



	As of December 31
	2018		2017
	(Millions)
Borrowings on securitization programs	$	6	$	30

The Company had an accounts receivable securitization program in which original equipment and aftermarket receivables were securitized on a daily basis. The Company was responsible for performing all accounts receivable administration functions for these securitized financial assets including collections and processing of customer invoice adjustments. In October 2018, this program was terminated. As of December 31, 2017, the carrying amount of assets pledged as collateral for this securitization program was $343 million.

Off-Balance Sheet Arrangements

In the Company's European and U.S. accounts receivable factoring programs, accounts receivables are transferred in their entirety to the acquiring entities and are accounted for as a sale. Due to the Acquisition, additional factoring arrangements in the U.S. and Europe were acquired which are also accounted for as a sale and have been included in the tables below. The fair value of assets received as proceeds in exchange for the transfer of accounts receivable under these factoring programs approximates the fair value of such receivables. Certain programs in Europe have deferred purchase price arrangements with the banks.

The Company is the servicer of the receivables under some of these arrangements and is responsible for performing all accounts receivable administration functions. Where the Company receives a fee to service and monitor these transferred accounts receivables, such fees are sufficient to offset the costs and as such, a servicing asset or liability is not recorded as a result of such activities.

In the U.S and Canada, the Company participates in supply chain financing programs with certain of the Company's aftermarket customers through a drafting program.

The amounts outstanding for these factoring and drafting arrangements as of December 31, 2018 and 2017 are as follows:



	As of December 31
	2018		2017
	(Millions)
Accounts receivable outstanding and derecognized	$	1,011	$	406
Deferred purchase price receivable	$	154	$	114

Proceeds from the factoring of accounts receivable qualifying as sales and drafting programs, and expenses associated with these arrangements for the years ended December 31, 2018, 2017, and 2016 are as follows:



	Year Ended December 31
	2018		2017		2016
	(Millions)
Proceeds from factoring qualifying as sales	$	3,390	$	1,984	$	1,770
Loss on sale of receivables	$	16	$	5	$	5

If the Company were not able to factor receivables or sell drafts under either of these programs, its borrowings under its revolving credit agreement might increase. These programs provide the Company with access to cash at costs that are generally favorable to alternative sources of financing and allow the Company to reduce borrowings under its revolving credit agreement.