Debt

Short-term borrowings were as follows:



	December 31,
	2016		2015
Related party notes payable⁽¹⁾	$	—	$	1,132
Current maturities of long-term debt	28		24
Total Short-term Debt	$	28	$	1,156

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(1)	Refer to Note 20 - Related Party Transactions and Former Parent Company Investment for additional information.

We classify our debt based on the contractual maturity dates of the underlying debt instruments or as of the earliest put date available to the debt holders. We defer costs associated with debt issuance over the applicable term. These costs are amortized as interest expense in our Consolidated Statements of Income.

Long-term debt was as follows:



			December 31,
	Weighted Average Interest Rates at December 31, 2016⁽¹⁾		2016			2015

Term loan A due 2021	2.99	%	$	694		$	—
Term loan B due 2023	6.81	%	750			—
Senior notes due 2024	10.51	%	510			—
Capital lease obligations	3.89	%	43			61
Principal Debt Balance			$	1,997		$	61
Debt issuance costs and unamortized discounts			(56		)	—
Less: current maturities			(28		)	(24		)
Total Long-term Debt			$	1,913		$	37

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(1)	Represents weighted average effective interest rate which includes the effect of discounts and premiums on issued debt.

Scheduled principal payments due on our long-term debt for the next five years and thereafter are as follows:



2017⁽¹⁾		2018		2019		2020		2021		Thereafter		Total
$	28	$	72	$	67	$	79	$	528	$	1,223	$	1,997

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(1)	Quarterly long-term debt maturities for 2017 are $7, $7, $7 and $7 for the first, second, third and fourth quarters, respectively.

Credit Facility

On December 7, 2016, we entered into a $2.2 billion senior secured credit agreement (Credit Agreement) among the Company, its subsidiaries Xerox Business Services, LLC (XBS), Affiliated Computer Services International B.V. and Conduent Finance, Inc. (CFI), the lenders party and JP Morgan Chase Bank, N.A., as the administrative agent. The Credit Agreement contains senior secured credit facilities (Senior Credit Facilities) consisting of:


(i)	Senior Secured Term Loan A (Term Loan A) due 2021 with an aggregate principal amount of $700;


(ii)	Senior Secured Term Loan B (Term Loan B) due 2023 with an aggregate principal amount of $750;


(iii)	Senior Revolving Credit Facility (Revolving Credit Facility) due 2021 with an aggregate available amount of $750 including a sublimit for up to $300 available for the issuance of letters of credit.

Borrowings under the Term Loan A Facility and the Revolving Credit Facility will bear interest at a rate equal to either the sum of a base rate plus a margin ranging from 1.00% and 1.50% or the sum of a Eurocurrency rate plus an applicable rate ranging from 2.00% to 2.50%, with either such margin varying according to the total net leverage ratio of XBS. Borrowing under Term Loan B Facility will bear interest at a rate equal to the sum of a base rate plus 4.5%, or the sum of a Eurocurrency rate plus 5.5%. XBS is required to pay a quarterly commitment fee under the Revolving Credit Facility at a rate ranging from 0.35% to 0.40% per annum, with such rate varying according to the total net leverage ratio of XBS and the actual daily unused portion of the commitments during the applicable quarter. XBS is also required to pay a fee equal to the adjusted LIBOR on the aggregate face amount of outstanding letters of credit under the Revolving Credit Facility.

The Credit Agreement permits us to incur incremental term loan borrowings and /or increase commitments under the Revolving Credit Facility, subject to certain limitations and satisfaction of certain conditions, in an aggregate amount not to exceed (i) $300 plus, (ii) if the senior secured net leverage ratio of XBS and its subsidiaries does not exceed 2.25 to 1.00 on a pro forma basis (without giving effect to any incurrence under clause (i) that is incurred substantially simultaneously with amounts incurred under clause (ii)), an unlimited amount.

All obligations under the Senior Credit Facilities are unconditionally guaranteed by the Company, XBS, CFI and the existing and future direct and indirect wholly owned domestic subsidiaries of XBS (subject to certain exceptions). All obligations under the Senior Credit Facilities, and the guarantees of those obligations, are secured, subject to certain exceptions, by substantially all of the assets of XBS and the guarantors under the Senior Credit Facilities (other than the Company and CFI), including a first-priority pledge of all the capital stock of XBS and the subsidiaries of XBS directly held by XBS or the guarantors (other than the Company and CFI) under the Senior Credit Facilities (which pledge, in the case of any foreign subsidiary, will be limited to 65% of the capital stock of any first-tier foreign subsidiary).

The Credit Facility contains certain customary affirmative and negative covenants, restrictions and events of default. XBS is required to maintain a total net leverage ratio not to exceed 4.25 to 1.00 (a quarterly test) for each quarter through September 30, 2018 and 3.75 to 1.00 for each quarter thereafter.

The net proceeds of the borrowings under the Term Loan A of $700 (approximately $278 borrowed in Euros) and Term Loan B of $750, were used to purchase our international subsidiaries from Xerox Corporation, to pay a distribution to Xerox Corporation and for working capital and other general corporate purposes. At December 31, 2016 we had $1,444 outstanding borrowings under our Credit Facility and had utilized $17 of our Revolving Credit Facility capacity to issue letters of credit. Discounts and debt issuance costs of $39 were deferred.

Senior Notes

On December 7, 2016, XBS and CFI, each a wholly owned subsidiary of the Company, issued $510 Senior Unsecured Notes due 2024 bearing interest at 10.5% (the "Senior Notes"). Interest is payable semi-annually, beginning on June 15, 2017. Discounts and debt issuance costs of $17 were deferred.

At the option of the Issuers, the Senior Notes are redeemable in whole or in part, at any time prior to December 15, 2020, at a price equal to 100% of the aggregate principal amount of the Senior Notes plus accrued and unpaid interest, if any, to, but excluding, the redemption date plus a “make-whole” premium. The Issuers may also redeem the Senior Notes, in whole or in part, at any time on or after December 15, 2020, at the redemption prices specified in the Indenture, plus accrued and unpaid interest, if any, to but excluding the redemption date. Additionally, at any time prior to December 15, 2019, the Issuers may redeem up to 35% of the aggregate principal amount of the Senior Notes with the net cash proceeds from certain equity offerings at a price equal to 110.50% of the principal amount of the Senior Notes, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

The Senior Notes are jointly and severally guaranteed on a senior unsecured basis by the Company and each of the existing and future domestic subsidiaries of CFI or XBS that guarantee the obligations under the Senior Credit Facilities.

Proceeds from the issuance were used to fund a portion of the transfer of cash to Xerox Corporation in connection with the Spin-Off.

Interest

Interest paid on our short-term and long-term debt amounted to $6, $9 and $13 for the years ended December 31, 2016, 2015 and 2014, respectively.

Interest expense and interest income was as follows:



	Year Ended December 31,
	2016		2015		2014
Interest expense	$	14	$	8	$	11
Interest income	3		3		1