Note I. Debt and Other Obligations

Long-term Obligations

The Company’s long-term obligations, the fiscal year in which they mature and their respective interest rates are summarized below:


	September 30
	2013			2012
	(Dollars in millions)
Variable Rate Debt:
$750 million Revolving Credit Facility, expires 2016	$	—		$	189
Chinese Renminbi Notes, due through 2016, 5.40%—6.77%		47			11

Total variable rate debt		47			200
Fixed Rate Debt:
5% Notes due 2017	$	300		$	300
2.55% Notes due 2018		250			250
3.7% Notes due 2022		350			350
Medium Term Notes:
Notes due 2019, 7.42%		30			30
Notes due 2022, 8.346%—8.47%		15			15
Note due 2028, 6.57%—7.28%		8			8

Total Medium Term Notes	$	53		$	53
Eurobond, due 2013, 5.25%		—			177
ESOP Note, due 2014, 8.29%		2			8
Chinese Renminbi Notes, due through 2018, 4.68%—6.65%		16			5

Total fixed rate debt		971			1,143
Capital lease obligations, due through 2031		18			16
Unamortized debt discount		(2	)		(2	)

Total debt		1,034			1,357
Less current portion of long-term debt		(14	)		(185	)

Total long-term debt	$	1,020		$	1,172

$750 million Revolving Credit Facility—The Company has a $750 million committed unsecured revolving credit agreement which expires in August 2016. All borrowings under the credit agreement are based on variable interest rates. Generally, the interest rates are based on LIBOR plus a spread. This spread, which was 1.125% as of September 30, 2013, is based on the Company’s credit rating, resulting in a total interest rate of 1.304% as of September 30, 2013. The Company plans to use the credit agreement for general corporate purposes, which may include working capital, refinancing existing indebtedness, capital expenditures, share repurchases, and acquisitions, and support for the commercial paper program. The credit agreement contains affirmative, negative and financial covenants and events of default customary for financings of this type. The financial covenants in the credit agreement include interest coverage, debt-to-EBITDA and subsidiary debt to total capitalization ratios. As of September 30, 2013, no amounts were outstanding on this facility. The amount available on the revolving credit agreement, after consideration of letters of credit and commercial paper outstanding, was $508 million as of September 30, 2013.

Chinese Renminbi Debt—The Company’s consolidated Chinese subsidiaries had $63 million and $16 million of unsecured long-term debt outstanding as of September 30, 2013 and September 30, 2012, respectively. The increase relates to the financing of the rubber blacks manufacturing facility in Xingtai City, Hebei Province, China.

5% Notes due fiscal 2017— In fiscal 2009, Cabot issued $300 million in public notes with a coupon of 5% that will mature on October 1, 2016. These notes are unsecured and pay interest on April 1 and October 1. The net proceeds of this offering were $296 million after deducting discounts and issuance costs. The discount of approximately $2 million was recorded at issuance and is being amortized over the life of the notes.

2.55% Notes due fiscal 2018—In July 2012, Cabot issued $250 million in public notes with a coupon of 2.55% that will mature on January 15, 2018. These notes are unsecured and pay interest on January 15 and July 15. The net proceeds of this offering were $248 million after deducting discounts and issuance costs. The discount of less than $1 million was recorded at issuance and is being amortized over the life of the notes.

3.7% Notes due fiscal 2022—In July 2012, Cabot issued $350 million in public notes with a coupon of 3.7% that will mature on July 15, 2022. These notes are unsecured and pay interest on January 15 and July 15. The net proceeds of this offering were $347 million after deducting discounts and issuance costs. The discount of less than $1 million was recorded at issuance and is being amortized over the life of the notes.

Medium Term Notes—At both September 30, 2013 and 2012, there were $53 million of unsecured medium term notes outstanding issued to numerous lenders with various fixed interest rates and maturity dates. The weighted average maturity of the total outstanding medium term notes is 8 years with a weighted average interest rate of 7.65%.

Eurobond—A European subsidiary issued an unsecured $175 million U.S. dollar denominated bond with a fixed coupon rate of 5.25% in fiscal 2003 with interest due on March 1 and September 1 of each year. The functional currency of this subsidiary is the Euro. A discount of approximately $1 million was recorded at issuance and was amortized over the life of the bond. A portion of the Eurobond was designated as a fair value hedge and accordingly was recorded at fair value. As described in Note K, the Company entered into cross-currency swaps and a variable interest rate swap to hedge the variability in cash flows for changes in the exchange rates and to offset a portion of the changes in the fair value of the underlying debt. The bond, and associated derivatives, matured and were repaid in September 2013.

ESOP Debt—In November 1988, Cabot’s Employee Stock Ownership Plan (“ESOP”) borrowed $75 million from an institutional lender in order to finance its purchase of Cabot shares. This debt bears interest at 8.29% per annum and is to be repaid in quarterly installments through December 31, 2013. Cabot, as guarantor, has reflected the outstanding balance of $2 million and $8 million at September 30, 2013 and 2012, respectively. An equal amount, representing deferred employee benefits, has been recorded as a reduction to stockholders’ equity. Cabot contributed $4 million to the ESOP to service the debt during fiscal 2013, $5 million during fiscal 2012, and $4 million during fiscal 2011. Dividends on ESOP shares used for debt service were $2 million for each of fiscal years 2013, 2012 and 2011. In addition, interest incurred on the ESOP debt was less than $1 million during fiscal 2013 and $1 million during both fiscal 2012 and 2011.

Capital Lease Obligations— Cabot had capital lease obligations for certain equipment and buildings with a recorded value of $18 million and $16 million at September 30, 2013 and 2012, respectively. Cabot will make payments totaling $42 million over the next 18 years, including $12 million of imputed interest. At September 30, 2013 and 2012, the original cost of capital lease assets was $24 million and $26 million, respectively, and the associated accumulated depreciation of assets under capital leases was $9 million and $11 million at September 30, 2013 and 2012, respectively. The amortization related to those assets under capital lease is included in depreciation expense.

Future Years Payment Schedule

The aggregate principal amounts of long-term debt and capital lease obligations due in each of the five years from fiscal 2014 through 2018 are as follows:


Fiscal Years Ending	Principal payments on long term debt		Payments on Capital Lease Obligations			Total
	(Dollars in millions)
2014	$	12	$	5		$	17
2015		30		4			34
2016		11		3			14
2017		300		3			303
2018		262		3			265
Thereafter		403		24			427
Less: executory costs and interest		—		(24	)		(24	)

Total	$	1,018	$	18		$	1,036

Standby letters of credit—At September 30, 2013, the Company had provided standby letters of credit that were outstanding and not drawn totaling $10 million, which expire through fiscal 2014.

Short Term Obligations

Short-term Notes Payable —The Company had unsecured short-term notes of $264 million and $62 million as of September 30, 2013 and 2012, respectively, with maturities of less than one year. The weighted-average interest rate on short-term notes payable, including commercial paper, was 0.7% and 5.2% for fiscal 2013 and 2012, respectively.

In January 2013, Cabot entered into agreements to initiate a commercial paper program under which Cabot may issue unsecured commercial paper. The maximum aggregate balance of commercial paper and the revolving credit facility may not exceed the current maximum size of the revolving credit facility, $750 million. The proceeds from the issuance of the commercial paper have been used for general corporate purposes, which may include working capital, refinancing existing indebtedness, capital expenditures, share repurchases, and acquisitions. The revolving credit facility is available to repay the outstanding commercial paper, if necessary. The commercial paper will typically be sold at a discount from par at rates that will vary based upon market conditions at the time of the issuance of the commercial paper. The maturities of the commercial paper will vary but may not exceed 364 days from the date of issue. The definitive documents relating to the Program contain customary representations, warranties, default and indemnification provisions.

The outstanding balance of commercial paper included within the $264 million Notes payable on the Consolidated Balance Sheets as of September 30, 2013 was $241 million, bearing a weighted-average interest rate of 0.32% with a weighted-average maturity of 28 days.