Debt

Debt Obligations

Our total long-term borrowings as of December 31, 2014, and December 31, 2013, were composed of the following:



	As of
	December 31, 2014			December 31, 2013
	(In millions)
Senior notes:
€500 million 0.0% convertible note due 2013⁽¹⁾	$	—		$	61.8
CAD 900 million 5.0% notes due 2015⁽²⁾	774.5			847.2
CAD 500 million 3.95% Series A notes due 2017⁽²⁾	430.3			470.7
$300 million 2.0% notes due 2017⁽³⁾	300.0			300.0
$500 million 3.5% notes due 2022⁽³⁾	510.8			500.0
$1.1 billion 5.0% notes due 2042⁽³⁾	1,100.0			1,100.0
Other long-term debt	—			0.2
Long-term credit facilities⁽⁴⁾	—			—
Less: unamortized debt discounts	(4.2		)	(5.1		)
Total long-term debt (including current portion)	3,111.4			3,274.8
Less: current portion of long-term debt	(774.3		)	(61.8		)
Total long-term debt	$	2,337.1		$	3,213.0

Short-term borrowings:
Commercial paper program⁽⁵⁾	$	—		$	379.8
Overdraft facility⁽⁶⁾	64.6			—
Short-term facilities⁽⁷⁾:
Japanese Yen ("JPY") 1.5 billion line of credit	4.9			3.1
EUR 100 million revolving credit facility	—			137.4
Other short-term borrowings	5.6			4.8
Current portion of long-term debt	774.3			61.8
Current portion of long-term debt and short-term borrowings	$	849.4		$	586.9


(1)	On June 15, 2012, we issued a €500 million convertible note due December 31, 2013, which included a put conversion feature to the Seller. On August 13, 2013, the conversion feature was exercised for an agreed value upon exercise of €510.9 million, consisting of €500 million in principal and €10.9 million for the conversion feature.

On September 3, 2013, we paid the seller in cash a total of €466.0 million ($614.7 million) consisting of €455.1 million ($600.3 million) in principal and €10.9 million ($14.4 million) for the conversion feature. Separate from the Seller's notice to put, we made claims with regard to the representations and warranties provided to us upon close of the Acquisition related to local country regulatory matters associated with pre-acquisition periods. As of December 31, 2013, we had withheld €44.9 million ($61.8 million) from the €500 million in principal related to these outstanding claims. During the first half of 2014, we released the €44.9 million ($61.4 million at settlement) withheld to the Seller as a result of the settlement of these claims. We did not incur any interest on amounts withheld.

The €500 million convertible note's embedded conversion feature was determined to meet the definition of a derivative required to be bifurcated and separately accounted for at fair value with changes in fair value recorded in earnings. During 2013 and 2012, we recognized a net loss of $6.5 million and a net gain of $7.3 million, respectively, on the conversion feature related to changes in the fair value of the conversion feature. The cash and non-cash interest, excluding the change in fair value of the convertible feature, resulted in an immaterial impact to our effective interest rate for 2013 and 2012. See Note 17, "Derivative Instruments and Hedging Activities" for further discussion.

(2)

During the third quarter of 2005, Molson Coors Capital Finance ULC completed a CAD 900 million private placement in Canada due September 22, 2015. Additionally, during the fourth quarter 2010, Molson Coors International LP completed a CAD 500 million private placement in Canada due October 6, 2017. Prior to issuing the bonds, we entered into forward starting interest rate transactions for a portion of each Canadian offering. The bond forward transactions effectively established, in advance, the yield of the government of Canada bond rate over which the Company's private placement was priced. At the time of the private placement offerings and pricings, the government of Canada bond rates were trading at a yield lower than that locked in with the Company's interest rate locks. This resulted in a loss on the bond forward transactions of $4.0 million related to the CAD 900 million bonds, and $7.8 million on the CAD 500 million bonds. Per authoritative accounting guidance pertaining to derivatives and hedging, the losses are being amortized over the life of each respective Canadian issued private placement and will serve to increase our effective cost of borrowing compared to the stated coupon rates by 0.05% and 0.23% on the CAD 900 million and CAD 500 million bonds, respectively.

(3)

On May 3, 2012, we issued $1.9 billion of senior notes with portions maturing in 2017, 2022 and 2042. The 2017 senior notes were issued in an initial aggregate principal amount of $300 million at 2.0% interest and will mature on May 1, 2017. The 2022 senior notes were issued in an initial aggregate principal amount of $500 million at 3.5% ("$500 million notes") interest and will mature on May 1, 2022. The 2042 senior notes were issued in an initial aggregate principal amount of $1.1 billion at 5.0% interest and will mature on May 1, 2042. The issuance resulted in total proceeds to us, before expenses, of $1,880.7 million, net of underwriting fees and discounts of $14.7 million and $4.6 million, respectively. Total debt issuance costs capitalized in connection with these senior notes, including the underwriting fees and discounts, are approximately $18.0 million and will be amortized over the life of the notes.

Concurrent with the announcement of the Acquisition, we entered into a bridge loan agreement, which we terminated upon the issuance of the $1.9 billion senior notes. In connection with the issuance and subsequent termination of the bridge loan, we incurred costs of $13.0 million recorded in other expense in the second quarter of 2012. See Note 6, "Other Income and Expense" for further discussion.

In advance of our issuance of the $1.9 billion senior notes, we systematically removed a portion of our interest rate market risk by entering into Treasury Locks. This resulted in an increase in the certainty of our yield to maturity when issuing the notes. In the second quarter of 2012, we recognized a cash loss of $39.2 million on settlement of the Treasury Locks recorded in interest expense. See Note 17, "Derivative Instruments and Hedging Activities" for further discussion.

During 2014, we entered into interest rate swaps to economically convert our fixed rate $500 million notes to floating rate debt. This resulted in an effective interest rate of 3.13%, for 2014. As a result of this hedge program, for the year ended December 31, 2014, the changes in fair value of the interest rate swaps and the offsetting changes in fair value of the $500 million notes attributable to the benchmark interest rate were unrealized positions of $10.8 million recorded in interest expense in our consolidated statement of operations. Accordingly, the carrying value of the $500 million note includes a $10.8 million adjustment for fair value movements attributable to the benchmark interest rate, recorded as an unrealized loss in interest expense in our consolidated statement of operations, which has been excluded from the aggregate principal debt maturities table presented below. See Note 17, "Derivative Instruments and Hedging Activities" for further details.

(4)

During the second quarter of 2014, we entered into a five-year, $750 million revolving multi-currency credit facility, which provides a $100 million sub-facility available for the issuance of letters of credit. This revolving facility replaced our existing $400 million and $550 million revolving credit facilities, which had maturities in the second quarters of 2015 and 2016, respectively. As a result, we made a reduction to the size of our existing commercial paper program of $950 million which was approved and implemented during the first quarter of 2013 to a maximum aggregate amount outstanding at any time of $750 million. Concurrent with the transaction, we incurred $1.8 million of issuance costs related to the this revolving credit facility which are being amortized over the term of the agreement and recognized $1.3 million of accelerated amortization related to the termination of the pre-existing facilities. As of December 31, 2014, there were no borrowings under our this revolving credit facility. There were no outstanding borrowings under our pre-existing credit facilities upon termination or as of December 31, 2013. The $750 million revolving credit facility contains customary events of default and specified representations and warranties and covenants, including, among other things, covenants that limit our subsidiaries' ability to incur certain additional priority indebtedness, create or permit liens on assets, or engage in mergers or consolidations.


(5)	As of December 31, 2014, there were no outstanding borrowings under the commercial paper program, and as of December 31, 2013, the outstanding borrowings were $379.8 million at a weighted average effective interest rate and tenor of 0.49% and 47.2 days, respectively.


(6)	As of December 31, 2014, we had $64.6 million in bank overdrafts and $80.0 million in bank cash related to our European notional cross-border, cross-currency cash pool for a net positive position of $15.4 million. As of December 31, 2013, we did not have bank overdrafts related to the cash pool.

(7)

In the third quarter of 2013, the current revolving credit facility supporting the operations of our Europe segment was renewed and restructured to provide €150 million on an uncommitted basis through September 2014. During the third quarter of 2014, this revolving credit facility was amended to extend the maturity date by one year and to reduce the facility commitment from €150 million to €100 million on an uncommitted basis through September 2015. Fees associated with this amendment were immaterial. There were no outstanding borrowings under this revolving credit facility as of December 31, 2014, and outstanding borrowings as of December 31, 2013, were $137.4 million.

In addition to our EUR revolving credit facility and JPY line of credit, we have British Pound ("GBP") 20.0 million overdraft facility at GBP LIBOR +1.5% and a CAD 30.0 million overdraft facility at either USD Prime or CAD Prime depending on the borrowing currency. Our JPY 1.5 billion line of credit has JPY 575.0 million committed under outstanding letters of credit, at a base rate of less than 1.0%. We also have a JPY 500.0 million line of credit with no outstanding borrowings as of December 31, 2014. We had outstanding borrowings of $4.9 million and $3.1 million under the JPY 1.5 billion line of credit, as of December 31, 2014, and December 31, 2013, respectively, and no borrowings under the GBP or CAD facilities. See Note 19, "Commitments and Contingencies" for discussion related to letters of credit. Also included in short-term borrowings is $5.6 million and $4.8 million related to other short-term borrowings within our Europe business as of December 31, 2014, and December 31, 2013, respectively.

Debt Fair Value Measurements

We utilize market approaches to estimate the fair value of certain outstanding borrowings by discounting anticipated future cash flows derived from the contractual terms of the obligations and observable market interest and foreign exchange rates. As of December 31, 2014, and December 31, 2013, the fair value of our outstanding long-term debt (including current portion) was $3,240.6 million and $3,359.1 million, respectively. All senior notes are valued based on significant observable inputs and would be classified as Level 2 in the fair value hierarchy. The carrying values of all other outstanding long-term borrowings and our short-term borrowings approximate their fair values and are also classified as Level 2.

Other

Under the terms of each of our debt facilities, we must comply with certain restrictions. These include restrictions on priority indebtedness (certain threshold percentages of secured consolidated net tangible assets), leverage thresholds, liens, and restrictions on certain types of sale lease-back transactions and transfers of assets. As of December 31, 2014, and December 31, 2013, we were in compliance with all of these restrictions and have met all debt payment obligations.

As of December 31, 2014, the aggregate principal debt maturities of long-term debt and short-term borrowings, based on foreign exchange rates at December 31, 2014, for the next five years are as follows:



Year	Amount
	(In millions)
2015	$	849.6
2016	—
2017	730.3
2018	—
2019	—
Thereafter	1,600.0
Total	$	3,179.9

Interest

Interest incurred, capitalized and expensed were as follows:



	For the years ended
	December 31, 2014			December 31, 2013			December 29, 2012
	(In millions)
Interest incurred⁽¹⁾	$	147.7		$	185.2		$	198.6
Interest capitalized	(2.7		)	(1.4		)	(2.3		)
Interest expensed	$	145.0		$	183.8		$	196.3

(1)

Interest incurred includes total non-cash interest of $11.2 million and $19.0 million in 2013 and 2012, respectively, related to the €500 million convertible note and the $575 million convertible note. Interest incurred also includes the change in fair value of the embedded conversion feature related to €500 million convertible note of $5.4 million expense and $8.0 million income for 2013 and 2012, respectively, as well as amortization of debt discounts and issuance costs.