Debt and Other Borrowings

Components of Debt

The following is a summary of obligations under senior notes and other borrowings at June 30, 2018 and December 31, 2017:



(In millions)	June 30, 2018			December 31, 2017
5.5% Senior Notes due in 2026, net of unamortized debt issuance costs of $4.6 million at June 30, 2018	$	345.4		$	—
9.5% Senior Notes due in 2023, net of unamortized debt issuance costs of $6.4 million at December 31, 2017	—			518.6
Revolving credit facility due 2023⁽¹⁾	—			—
Other borrowings⁽²⁾	19.7			25.7
Total debt	365.1			544.3
Less debt payable within one year	18.4			24.0
Debt payable after one year	$	346.7		$	520.3
Weighted average interest rates on total debt obligations	5.7		%	9.4		%

__________________________


⁽¹⁾	Represents borrowings under the Revolving Credit Facility with an aggregate available principal amount of $350.0 million and $250.0 million as of June 30, 2018 and December 31, 2017, respectively.


⁽²⁾	Represents borrowings under various lines of credit and other borrowings, primarily by non-U.S. subsidiaries.

The principal maturities of debt obligations outstanding, net of debt issuance costs, were as follows at June 30, 2018:



(In millions)
Year ending December 31,	Amount
2018	$	18.4
2019	0.9
2020	0.5
2021	—
2022	—
Thereafter	345.3
Total debt	$	365.1

Debt Refinancing

On April 10, 2018, GCP redeemed its then existing 9.5% Senior Notes with an aggregate principal amount of $525.0 million due in 2023 (the “9.5% Senior Notes”). On April 10, 2018, the Company also issued 5.5% Senior Notes with an aggregate principal amount of $350.0 million maturing on April 15, 2026 (the "5.5% Senior Notes") and amended its Credit Agreement to, among other things, (i) increase the aggregate principal amount available under its revolving credit facility to $350.0 million, (ii) extend the maturity date of the revolving credit facility thereunder to April 2023 and (iii) make certain other changes to the covenants and other provisions therein. Additionally, the Company borrowed $50.0 million in aggregate principal amount of revolving loans under the Credit Agreement on April 10, 2018 which was fully repaid during the second quarter of 2018. The aggregate cash payment of $587.9 million, which consisted of: (i) proceeds of $350.0 million from the issuance of the 5.5% Senior Notes, net of loan origination fees of $3.1 million, (ii) borrowings of $50.0 million under the Credit Agreement, and (iii) a cash payment of $191.0 million was used to redeem all of the then outstanding 9.5% Senior Notes in accordance with the terms of the indenture governing the 9.5% Senior Notes.

The redemption of the 9.5% Senior Notes was accounted for as a debt extinguishment in accordance with provisions of ASC Topic 470-50, Debt Modifications and Extinguishments. During the three and six months ended June 30, 2018, GCP recognized a loss on debt extinguishment of $59.4 million which was included in "Interest expense and related financing costs" in the accompanying unaudited Consolidated Statements of Operations. In connection with the redemption of the 9.5% Senior Notes with then outstanding principal balance of $525.0 million, GCP paid total cash proceeds of $587.9 million, including $53.3 million of a redemption premium and $9.6 million of accrued interest unpaid thereon through the redemption date, and wrote off $6.1 million of previously deferred debt issuance costs.

The amendment to the Credit Agreement among GCP and a syndicate of financial institutions resulted in an increase in a maximum borrowing capacity under the Revolving Credit Facility from $250.0 million to $350.0 million and extension of the maturity date to April 2023. During the three months ended June 30, 2018, GCP wrote off $0.4 million of deferred debt issuance costs related to a financial institution that exited the syndicate upon amendment of the Credit Agreement. As of June 30, 2018, debt issuance costs of $4.5 million related to the financial institutions that remained in the syndicate are presented within "Other assets" in the accompanying unaudited Consolidated Balance Sheets and amortized over the term of the Revolving Credit Facility.

Total loss recognized on the debt refinancing transaction was $59.8 million which was included in "Interest expense and related financing costs" in the accompanying unaudited Consolidated Statements of Operations and consisted of $59.4 million related to the extinguishment of the 9.5% Senior Notes and $0.4 million related to a deferred issuance costs write- off in connection with the amendment of the Credit Agreement.

5.5% Senior Notes

On April 10, 2018, GCP issued 5.5% Senior Notes with an aggregate principal amount of $350.0 million maturing on April 15, 2026. The 5.5% Senior Notes were issued at $346.9 million, or 99.1% of their par value, resulting in a discount of $3.1 million, or 0.9%, which represented loan origination fees paid at the closing. The Company incurred additional deferred financing costs of $1.6 million during the three months ended June 30, 2018. Interest is payable semi-annually in arrears on April 15 and October 15 of each year, commencing on October 15, 2018. An interest payment of $9.9 million is due and payable on October 15, 2018.

The 5.5% Senior Notes were issued pursuant to an Indenture (the “Indenture”), by and among GCP, the guarantors party thereto (the “Note Guarantors”) and Wilmington Trust, National Association, as trustee. The 5.5% Senior Notes and the related guarantees rank equally with all of the existing and future unsubordinated indebtedness of GCP and the Note Guarantors and senior in right of payment to any existing and future subordinated indebtedness of GCP and the Note Guarantors. The 5.5% Senior Notes and related guarantees are effectively subordinated to any secured indebtedness of GCP or the Note Guarantors, as applicable, to the extent of the value of the assets securing such indebtedness and structurally subordinated to all existing and future indebtedness and other liabilities of GCP’s non-guarantor subsidiaries.

Subject to certain conditions stated in the Indenture, GCP may, at its option and at any time and from time to time prior to April 15, 2021, redeem the 5.5% Senior Notes in whole or in part at a redemption price equal to: (i) 100% of their principal amount redeemed, plus (ii) the applicable premium, as defined in the Indenture, plus (iii) accrued and unpaid interest, if any, to, but excluding, the applicable redemption date. In addition, GCP may, at its option, redeem up to 40% of the outstanding principal amount of the 5.5% Senior Notes at any time and from time to time prior to April 15, 2021 with the net cash proceeds from certain equity offerings at a redemption price equal to: (i) 105.5% of the principal amount redeemed, plus (ii) accrued and unpaid interest, if any, to, but excluding, the applicable redemption date. At any time and from time to time on or after April 15, 2021, GCP may, at its option, redeem the 5.5% Senior Notes in whole or in part at the redemption price equal: (i) 102.8% of the par value if redeemed after April 15, 2021, (ii) 101.4% of the par value if redeemed after April 15, 2022, and (iii) 100.0% of the par value if redeemed after April 15, 2023 and thereafter. Upon occurrence of a change of control, as defined in the Indenture, GCP will be required to make an offer to repurchase the 5.5% Senior Notes at a price equal to 101.0% of their aggregate principal amount repurchased plus accrued and unpaid interest, if any, to, but excluding, the date of repurchase.

The Indenture contains covenants that limit the ability of GCP and its subsidiaries, subject to certain exceptions and qualifications set forth therein, to (i) create or incur liens on certain assets, (ii) incur additional debt, (iii) make certain investments and acquisitions, (iv) consolidate, merge, or convey, transfer, or lease all or substantially all of their assets, (v) sell certain assets, (vi) pay dividends on or make distributions in respect of GCP’s capital stock or make other restricted payments, (vii) enter into certain transactions with GCP’s affiliates and (viii) place restrictions on distributions from and other actions by subsidiaries. As of June 30 2018, the Company was in compliance with all covenants and conditions under the Indenture.

The Indenture provides for customary events of default which are subject in certain cases to customary grace periods and include, among others: (i) nonpayment of principal or interest, (ii) breach of other agreements in the Indenture, (iii) failure to pay certain other indebtedness, (iv) certain events of bankruptcy or insolvency, (v) failure to discharge final judgments aggregating in excess of $50.0 million rendered against GCP or certain of its subsidiaries, (vi) and failure of the guarantee of the 5.5% Senior Notes by any of GCP’s significant subsidiaries to be in full force and effect. There are no events of default under the Indenture as of June 30, 2018.

Credit Agreement

On February 3, 2016, GCP entered into a Credit Agreement that provides for senior secured credit facilities (the “Credit Facilities”) in an aggregate principal amount of $525.0 million, which consisted of: (i) the term loan (the "Term Loan") with an aggregate principal amount of $275.0 million and (ii) a revolving credit facility (the "Revolving Credit Facility") of $250.0 million due in 2021. During 2017, the Company fully repaid the outstanding principal balance on the Term Loan together with accrued and unpaid interest and extinguished the Term Loan under the Credit Agreement.

On April 10, 2018, GCP entered into an amendment to its Credit Agreement and borrowed $50.0 million in aggregate principal amount of revolving loans under the Credit Agreement, as discussed above, which was fully repaid prior to June 30, 2018.

The Credit Agreement contains conditions that would require mandatory principal payments in advance of the maturity date of the Revolving Credit Facility, as well as certain customary affirmative and negative covenants and events of default, as described in Note 5, "Debt and Other Financial Instruments," to the Company's Consolidated Financial Statements included in the 2017 Annual Report in the Form 10-K. The Company was in compliance with all covenant terms as of June 30, 2018 and December 31, 2017. There are no events of default as of June 30, 2018 and December 31, 2017.

The Revolving Credit Facility is secured on a first priority basis by a perfected security interest in, and mortgages on substantially all U.S. tangible and intangible personal property, financial assets and real property owned by the Company in Chicago, Illinois and Mount Pleasant, Tennessee; a pledge of 100% of the equity of each material U.S. subsidiary of the Company; and 65% of the equity of a U.K. holding company.

The interest rate per annum applicable to the Revolving Credit Facility is equal to, at GCP’s option, either: (i) a base rate plus a margin ranging from 0.5% to 1.0%, or (ii) LIBOR plus a margin ranging from 1.5% to 2.0%, based upon the total leverage ratio of GCP and its restricted subsidiaries in both scenarios. During the three months ended June 30, 2018, the weighted average interest rate paid on the Revolving Credit Facility was 3.4%. During the three months ended June 30, 2018, GCP made aggregate payments of $50.0 million on the Revolving Credit Facility. As of June 30, 2018, there were no outstanding borrowings on the Revolving Credit Facility and approximately $7.0 million in outstanding letters of credit, which resulted in available credit of $343.0 million under the Revolving Credit Facility. As of December 31, 2017, there were no outstanding borrowings under the Revolving Credit Facility. During each of the three and six months ended June 30, 2018, interest payment made on the Revolving Credit Facility was $0.2 million.

9.5% Senior Notes

On January 27, 2016, GCP issued $525.0 million aggregate principal amount of 9.5% Senior Notes maturing in 2023. Interest was payable semi-annually in arrears on February 1 and August 1 of each year. The 9.5% Senior Notes became callable at a premium over their face amount on February 1, 2019 and were redeemable prior to February 1, 2019 at a price that reflected a yield to the first call that was equivalent to the applicable Treasury bond yield plus 0.5 percentage points.

On April 10, 2018, GCP redeemed all of the then outstanding 9.5% Senior Notes, as described above, and paid $9.6 million of accrued interest unpaid thereon through their redemption date.

The 9.5% Senior Notes were subject to covenants that limited GCP's and certain of its subsidiaries’ ability, subject to certain exceptions and qualifications, to (i) create or incur liens on assets; (ii) incur additional debt; (iii) sell certain assets; and (iv) make certain investments and acquisitions, merge or sell or otherwise dispose of all or substantially all assets.

Debt Issuance Costs

GCP recognizes expenses directly associated with obtaining the Revolving Credit Facility as debt issuance costs which are presented within "Other assets" in the accompanying unaudited Consolidated Balance Sheets. Such costs are amortized over the term of the Revolving Credit Facility and included in “Interest expense and related financing costs” in the accompanying unaudited Consolidated Statements of Operations. Debt issuance costs related to the Revolving Credit Facility were $4.5 million as of June 30, 2018 and $3.2 million as of December 31, 2017. During the three months ended June 30, 2018, GCP wrote off $0.4 million of previously deferred debt issuance costs related to a financial institution that exited the syndicate upon amendment of the Credit Agreement. During the three months ended June 30, 2018, GCP incurred debt issuance costs of $2.2 million related to the Revolving Credit Facility upon amendment of the Credit Agreement.

Debt issuance costs of $4.7 million, including loan origination fees of $3.1 million paid at the closing, are directly associated with obtaining the 5.5% Senior Notes and presented as a reduction of the principal balance in the accompanying unaudited Consolidated Balance Sheets. Such costs are amortized over the term of the 5.5% Senior Notes using the effective interest rate method and included in “Interest expense and related financing costs” in the accompanying unaudited Consolidated Statements of Operations. At June 30, 2018, debt issuance costs related to the 5.5% Senior Notes were $4.6 million.

During the three months ended June 30, 2018, GCP wrote off $6.1 million of previously deferred debt issuance costs related to the 9.5% Senior Notes in connection with their redemption.

Debt Fair Value

At June 30, 2018, the carrying amounts and fair values of GCP's debt were as follows:



	June 30, 2018				December 31, 2017
(In millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
9.5% Senior Notes due in 2023	$	—	$	—	$	518.6	$	584.5
5.5% Senior Notes due in 2026	345.4		344.2		—		—
Other borrowings	19.7		19.7		25.7		25.7
Total debt	$	365.1	$	363.9	$	544.3	$	610.2

Fair value is determined based on Level 2 inputs, including expected future cash flows discounted at market interest rates, estimated current market prices and quotes from financial institutions. The decrease in fair value as of June 30, 2018 was primarily due to the call rates defined in the bond redemption schedule.