NOTE 6: DEBT

Debt at December 31 is detailed as follows:



	Effective
in thousands	Interest Rates	2017	2016
Short-term Debt
Bank line of credit expires 2021 1, 2	n/a	$ 0	$ 0
Total short-term debt		$ 0	$ 0
Long-term Debt
Bank line of credit expires 2021 1, 2	1.25%	$ 250,000	$ 235,000
Term loan due 2018 2, 3	2.96%	350,000	0
7.00% notes due 2018	n/a	0	272,512
10.375% notes due 2018	n/a	0	250,000
Floating-rate notes due 2020	2.22%	250,000	0
7.50% notes due 2021	7.75%	35,111	600,000
8.85% notes due 2021	8.88%	6,000	6,000
Term loan due 2021 2	2.75%	250,000	0
4.50% notes due 2025	4.65%	400,000	400,000
3.90% notes due 2027	4.00%	400,000	0
7.15% notes due 2037	8.05%	240,188	240,188
4.50% notes due 2047	4.59%	700,000	0
Other notes 2	6.46%	230	365
Total long-term debt - face value		$ 2,881,529	$ 2,004,065
Unamortized discounts and debt issuance costs		(26,664)	(21,176)
Total long-term debt - book value		$ 2,854,865	$ 1,982,889
Less current maturities		41,383	138
Total long-term debt - reported value		$ 2,813,482	$ 1,982,751
Estimated fair value of long-term debt		$ 2,983,419	$ 2,243,213


1	Borrowings on the bank line of credit are classified as short-term debt if we intend to repay within twelve months and as long-term debt otherwise.
2	Non-publicly traded debt.
3	This short-term loan was refinanced on a long-term basis in February 2018 as discussed below.

Discounts and debt issuance costs are amortized using the effective interest method over the terms of the respective notes resulting in $9,808,000 and $4,418,000, respectively, of net interest expense for these items for 2017 and 2016.

The estimated fair value of our debt presented in the table above was determined by: (1) averaging several asking price quotes for the publicly traded notes and (2) assuming par value for the remainder of the debt. The fair value estimates for the publicly traded notes were based on Level 2 information (as defined in Note 1, caption Fair Value Measurements) as of their respective balance sheet dates.

Subsequent to year-end, on February 23, 2018, we issued $350,000,000 of 4.70% notes due 2048 and $500,000,000 of floating-rate notes due 2021. The proceeds, together with cash on hand, were used to retire/repay without penalty or premium: (1) the $350,000,000 term loan due 2018, (2) the $250,000,000 term loan due 2021, and (3) the $250,000,000 bank line of credit borrowings. As a result, the $350,000,000 term loan due 2018 is reflected as long-term debt and its initial proceeds are presented as from the issuance of long-term debt on the 2017 consolidated statement of cash flow.

Additionally, on February 20, 2018, we commenced an exchange offer to the holders of the $240,188,000 of 7.15% notes due 2037 through which we would exchange any and all of these notes for newly issued notes due 2048 (these notes would be in addition to, and fungible with, the $350,000,000 million of notes due 2048) and cash. The amount of notes due 2037 tendered for exchange, and the amount of newly issued notes due 2048 and cash to be exchanged, will be determined in March 2018. We will receive no proceeds from the issuance of the notes due 2048 in the exchange offer.

LINE OF CREDIT

In December 2016, among other favorable changes, we extended the maturity date of our unsecured $750,000,000 line of credit from June 2020 to December 2021. The credit agreement contains affirmative, negative and financial covenants customary for an unsecured investment-grade facility. The primary negative covenant limits our ability to incur secured debt. The financial covenants are: (1) a maximum ratio of debt to EBITDA of 3.5:1 (upon certain acquisitions, the maximum ratio can be 3.75:1 for three quarters), and (2) a minimum ratio of EBITDA to net cash interest expense of 3.0:1. As of December 31, 2017, we were in compliance with the line of credit covenants.

Borrowings on our line of credit are classified as short-term debt if we intend to repay within twelve months and as long-term debt if we have the intent and ability to extend repayment beyond twelve months. Borrowings bear interest, at our option, at either LIBOR plus a credit margin ranging from 1.00% to 1.75%, or SunTrust Bank’s base rate (generally, its prime rate) plus a credit margin ranging from 0.00% to 0.75%. The credit margin for both LIBOR and base rate borrowings is determined by our credit ratings. Standby letters of credit, which are issued under the line of credit and reduce availability, are charged a fee equal to the credit margin for LIBOR borrowings plus 0.175%. We also pay a commitment fee on the daily average unused amount of the line of credit that ranges from 0.10% to 0.25% determined by our credit ratings. As of December 31, 2017, the credit margin for LIBOR borrowings was 1.25%, the credit margin for base rate borrowings was 0.25%, and the commitment fee for the unused amount was 0.15%.

As of December 31, 2017, our available borrowing capacity was $456,761,000. Utilization of the borrowing capacity was as follows:

$250,000,000 was borrowed

$43,239,000 was used to provide support for outstanding standby letters of credit

TERM DEBT

All of our $2,631,529,000 of term debt is unsecured. $2,031,299,000 of such debt is governed by two essentially identical indentures that contain customary investment-grade type covenants. The primary covenant in both indentures limits the amount of secured debt we may incur without ratably securing such debt. $600,000,000 of such debt is governed, as described below, largely by the same credit agreement that governs our line of credit. As of December 31, 2017, we were in compliance with all of the term debt covenants.

In December 2017, we early retired via tender offer, $564,889,000 of the 7.50% notes due 2021 at a cost of $662,613,000 including a premium of $96,167,000 and transaction costs of $1,558,000. Additionally, we recognized net noncash expense of $4,228,000 with the acceleration of deferred debt issuance costs. Subsequently, in January 2018 we early retired via redemption the remaining $35,111,000 of the 7.50% notes due 2021 at a cost of $40,719,000 including a premium of $5,608,000.

Also in December 2017, we entered into a 6-month $350,000,000 unsecured term loan with one of the banks that provides our line of credit. Borrowings bear interest at LIBOR plus 1.25%, and may be prepaid any time without penalty. This term loan incorporates by reference the representations, covenants and events of default contained in the credit agreement for the line of credit. As such, it is subject to the same affirmative, negative and financial covenants.

In June 2017, we issued $1,000,000,000 of debt composed of three issuances as follows: (1) $700,000,000 of 4.50% senior notes due June 2047, (2) $50,000,000 of 3.90% senior notes due April 2027 (these notes are a further issuance of, and form a single series with, the 3.90% notes issued in March 2017), and (3) $250,000,000 of floating-rate senior notes due June 2020. These issuances resulted in proceeds of $989,512,000 (net of original issue discounts/premiums, underwriter fees and other transaction costs). The proceeds were used to partially finance an acquisition and to early retire the notes due in 2018 ($272,512,000 @ 7.00% and $250,000,000 @ 10.375%). This early retirement was completed in July at a cost of $565,560,000 including a $43,020,000 premium, transaction costs of $28,000 and $3,029,000 of noncash expense associated with the acceleration of unamortized discounts, deferred debt issuance costs and deferred interest rate derivative settlement losses.

As a result of the 2017 early debt retirements described above, we recognized $139,187,000 of premiums, $1,586,000 of transaction costs and $7,257,000 of net noncash expense associated with the acceleration of unamortized discounts, deferred debt issuance costs and deferred interest rate derivative settlement losses. The combined charge of $148,030,000 was a component of interest expense for the year ended December 31, 2017.

In June 2017, we drew the full $250,000,000 on the unsecured delayed draw term loan entered into in December 2016. These funds were used to repay the $235,000,000 borrowed on our line of credit and for general corporate purposes. Borrowings bear interest in the same manner as the line of credit. The term loan principal will be repaid quarterly beginning March 2018 as follows: quarters 5 - 8 @ $1,562,500/quarter; 9 - 12 @ $3,125,000/quarter; 13 - 19 @ $4,687,500/quarter and $198,437,500 for quarter 20 (December 2021). The term loan may be prepaid at any time without penalty. It is provided by the same group of banks that provides our line of credit, and is governed by the same credit agreement as the line of credit. As such, it is subject to the same affirmative, negative, and financial covenants.

In March 2017, we issued $350,000,000 of 3.90% senior notes due April 2027 for proceeds of $345,450,000 (net of original issue discounts, underwriter fees and other transaction costs). The proceeds were used for general corporate purposes. This series of notes now totals $400,000,000 due to the additional $50,000,000 of notes issued in June (as described above).

In 2015, we issued $400,000,000 of 4.50% senior notes due 2025. Proceeds (net of underwriter fees and other transaction costs) of $395,207,000, together with cash on hand and borrowings under our line of credit, funded: (1) the purchase, via tender offer, of $127,488,000 principal amount (33%) of the 7.00% notes due 2018, (2) the redemption of $218,633,000 principal amount (100%) of the 6.40% notes due 2017, and (3) the redemption of $125,001,000 principal amount (100%) of the 6.50% notes due 2016. These debt purchases cost $530,923,000, including a $59,293,000 premium above the principal amount of the notes and transaction costs of $508,000. The premium primarily reflects the trading price of the notes relative to par before the tender offer commencement. Additionally, we recognized $7,274,000 of net noncash expense associated with the acceleration of a proportional amount of unamortized discounts, deferred debt issuance costs, and deferred interest rate derivative settlement gains and losses. The combined charge of $67,075,000 was a component of interest expense for the year ended December 31, 2015.

Additionally in 2015, we repaid our $150,000,000 10.125% notes due 2015 and our $14,000,000 industrial revenue bond due 2022 via borrowing on our line of credit. These repayments did not incur any prepayment penalties.

DEBT PAYMENTS

During 2017, our debt payments, excluding the line of credit, were composed of $1,087,536,000 principal, $143,226,000 interest and $140,772,000 cost of debt purchase. As described above, during the third and fourth quarters of 2017, we early retired $1,087,401,000 of debt.

During 2016, our debt payments, excluding the line of credit, were composed of $130,000 principal and $125,748,000 interest.

The total scheduled (principal and interest) debt payments, excluding the line of credit, for the five years subsequent to December 31, 2017 are as follows:



in thousands	Total	Principal	Interest
Debt Payments (excluding the line of credit)
2018	$ 493,801	$ 391,383	$ 102,418
2019	111,068	12,523	98,545
2020	363,480	268,775	94,705
2021	308,537	218,526	90,011
2022	82,309	28	82,281

STANDBY LETTERS OF CREDIT

We provide, in the normal course of business, certain third-party beneficiaries with standby letters of credit to support our obligations to pay or perform according to the requirements of an underlying agreement. Such letters of credit typically have an initial term of one year, renew automatically, and can only be modified or cancelled with the approval of the beneficiary. All of our standby letters of credit are issued by banks that participate in our $750,000,000 line of credit, and reduce the borrowing capacity thereunder. Our standby letters of credit as of December 31, 2017 are summarized by purpose in the table below:



in thousands
Standby Letters of Credit
Risk management insurance				$ 38,111
Reclamation/restoration requirements				5,128
Total				$ 43,239