Long-Term Debt

Long-Term Debt, net of discounts where applicable, is summarized as follows (in millions):



	June 30, 2017			September 30, 2016
4.0 percent convertible notes due 2027⁽¹⁾⁽³⁾	$	142		$	142
7.875 percent convertible notes due 2026⁽¹⁾⁽⁴⁾	131			129
6.75 percent notes due 2021⁽²⁾⁽⁵⁾	271			271
6.25 percent notes due 2024⁽²⁾⁽⁶⁾	443			442
Capital lease obligation	13			16
Export financing arrangements and other	—			10
Unamortized discount on convertible notes ⁽⁷⁾	(10		)	(14		)
Subtotal	990			996
Less: current maturities	(132		)	(14		)
Long-term debt	$	858		$	982

⁽¹⁾ The 4.0 percent convertible notes due 2027 and 7.875 percent convertible notes due 2026 contain a put and call feature, which allows for earlier redemption beginning in 2019 and 2020, respectively.

⁽²⁾The 6.75 percent notes and 6.25 percent notes contain a call option, which allows for early redemption.

⁽³⁾The 4.0 percent convertible notes due 2027 are presented net of $1 million unamortized issuance costs as of June 30, 2017 and September 30, 2016.

⁽⁴⁾ The 7.875 percent convertible notes due 2026 are presented net of $2 million unamortized issuance costs as of June 30, 2017 and September 30, 2016, and $7 million and $9 million original issuance discount as of June 30, 2017 and September 30, 2016, respectively.

⁽⁵⁾The 6.75 percent notes due 2021 are presented net of $4 million unamortized issuance costs as of June 30, 2017 and September 30, 2016.

⁽⁶⁾The 6.25 percent notes due 2024 are presented net of $7 million and $8 million unamortized issuance costs as of June 30, 2017 and September 30, 2016, respectively.

⁽⁷⁾The carrying amount of the equity component related to convertible debt.

Convertible Notes Due 2026

The 7.875 percent convertible notes due 2026 (the “2026 Notes”) were classified as current as of June 30, 2017 and noncurrent as of September 30, 2016 as the holders of the company's 2026 Notes are entitled to convert all or a portion of their 2026 Notes at any time beginning July 1, 2017 and prior to the close of business on September 29, 2017 at a rate of 83.3333 shares of common stock per $1,000 principal amount at maturity of the 2026 Notes (representing a conversion price of approximately $12.00 per share). The 2026 Notes are convertible as the closing price of shares of the company's common stock for at least 20 trading days during the 30 consecutive trading-day period ending on June 30, 2017 was greater than 120% of the $12.00 conversion price associated with the 2026 Notes.

The 2026 Notes surrendered for conversion, if any, would be settled in cash up to the principal amount at maturity of the 2026 Notes and cash, stock or a combination of cash and stock, at the company’s election, for the remainder of the conversion value of the 2026 Notes in excess of the principal amount at maturity and cash in lieu of any fractional shares, subject to and in accordance with the provisions of the indenture that governs the 2026 Notes.

As a result of the 2026 Notes becoming currently convertible for cash up to the principal amount of $140 million at the holder's option, $12 million of permanent equity was reclassified as mezzanine equity.

Revolving Credit Facility

On March 31, 2017, the company amended and restated its revolving credit facility. Pursuant to the revolving credit agreement as amended, the company has a $525 million revolving credit facility that matures in March 2022. Additionally, $4 million was capitalized as deferred issuance costs and will be amortized over the term of the agreement. The availability under this facility is dependent upon various factors, including performance against certain financial covenants as highlighted below.

The availability under the revolving credit facility is subject to certain financial covenants based on (i) the ratio of the company’s priority debt (consisting principally of amounts outstanding under the revolving credit facility, U.S. accounts receivable securitization and factoring programs, and third-party non-working capital foreign debt) to EBITDA and (ii) the amount of annual capital expenditures. The company is required to maintain a total priority debt-to-EBITDA ratio, as defined in the agreement, of 2.25 to 1.00 or less as of the last day of each fiscal quarter throughout the term of the agreement.

The availability under the revolving credit facility is also subject to a collateral test, pursuant to which borrowings on the revolving credit facility cannot exceed 1.0x the collateral test value. The collateral test is performed on a quarterly basis. At June 30, 2017, the revolving credit facility was collateralized by approximately $774 million of the company's assets, primarily consisting of eligible domestic U.S. accounts receivable, inventory, plant, property and equipment, intellectual property and the company's investment in all or a portion of certain of its wholly-owned subsidiaries.

Borrowings under the revolving credit facility are subject to interest based on quoted LIBOR rates plus a margin and a commitment fee on undrawn amounts, both of which are based upon the company’s current corporate credit rating. At June 30, 2017, the margin over LIBOR rate was 300 basis points and the commitment fee was 45 basis points. Overnight revolving credit loans are at the prime rate plus a margin of 200 basis points.

Certain of the company’s subsidiaries, as defined in the revolving credit agreement, irrevocably and unconditionally guarantee amounts outstanding under the revolving credit facility. Similar subsidiary guarantees are provided for the benefit of the holders of the publicly held notes outstanding under the company’s indentures (see Note 23).

No borrowings were outstanding under the revolving credit facility at June 30, 2017 and September 30, 2016. The amended and extended revolving credit facility includes $100 million of availability for the issuance of letters of credit. At June 30, 2017 and September 30, 2016, there were no letters of credit outstanding under the revolving credit facility.

Debt Securities

In December 2014, the company filed a shelf registration statement with the Securities and Exchange Commission, registering an unlimited amount of debt and/or equity securities that the company may offer in one or more offerings on terms to be determined at the time of sale. The December 2014 shelf registration statement superseded and replaced the shelf registration statement filed in February 2012, as amended.

Repurchase of Debt Securities

On March 1, 2016, substantially all of the $55 million principal amount of 4.625 percent convertible notes were repurchased at 100 percent of their face value. On April 15, 2016, the remaining 4.625 percent convertible notes were redeemed at 100 percent of their face value. As of September 30, 2016, none of the 4.625 percent convertible notes were outstanding.

The repurchases were made under the company's equity and equity linked repurchase authorizations (see Note 21). The repurchase program under these authorizations was complete as of September 30, 2016.

Capital Leases

On March 20, 2012, the company entered into an arrangement to finance equipment acquisitions for various U.S. locations. Under this arrangement, the company can request financing from Wells Fargo Equipment Finance (“Wells Fargo”) for progress payments for equipment under construction, not to exceed $10 million at any time. The financing rate is equal to the 30-day LIBOR plus 475 basis points per annum. Under this arrangement, the company can also enter into lease arrangements with Wells Fargo for completed equipment. The lease term is 60 months and the lease interest rate is equal to the 5-year Swap Rate published by the Federal Reserve Board plus 564 basis points. The company had $3 million and $7 million outstanding under this capital lease arrangement as of June 30, 2017 and September 30, 2016, respectively. In addition, the company had another $10 million and $9 million outstanding through other capital lease arrangements at June 30, 2017 and September 30, 2016, respectively.

Letter of Credit Facilities

On February 21, 2014, the company entered into an arrangement to amend and restate the letter of credit facility with Citicorp USA, Inc., as administrative agent and issuing bank, and the other lenders party thereto. Under the terms of this amended credit agreement, which expires in March 2019, the company has the right to obtain the issuance, renewal, extension and increase of letters of credit up to an aggregate availability of $25 million. This facility contains covenants and events of default generally similar to those existing in the company’s public debt indentures. There were $18 million and $23 million of letters of credit outstanding under this facility at June 30, 2017 and September 30, 2016, respectively. The company had another $5 million of letters of credit outstanding through other letter of credit facilities at June 30, 2017 and September 30, 2016.

Export Financing Arrangements

The company entered into a number of export financing arrangements through its Brazilian subsidiary during fiscal year 2014. The export financing arrangements were issued under an incentive program of the Brazilian government to fund working capital for Brazilian companies in exportation programs. The arrangements bore interest at 5.5 percent and had maturity dates in 2017. These financing arrangements were paid off at maturity, as of March 31, 2017. There was $9 million outstanding under these arrangements at September 30, 2016.

Other

One of the company's consolidated joint ventures in China participates in a bills of exchange program to settle its obligations with its trade suppliers. These programs are common in China and generally require the participation of local banks. Under these programs, the company's joint venture issues notes payable through the participating banks to its trade suppliers. If the issued notes payable remain unpaid on their respective due dates, this could constitute an event of default under the company’s revolving credit facility if the defaulted amount exceeds $35 million per bank. As of June 30, 2017 and September 30, 2016, the company had $16 million and $10 million, respectively, outstanding under this program at more than one bank.