Debt

Debt Obligations

Our total borrowings as of December 31, 2016, and December 31, 2015, were comprised of the following:



	As of
	December 31, 2016			December 31, 2015
	(In millions)
Senior notes:
CAD 500 million 3.95% Series A notes due 2017⁽¹⁾	$	372.0		$	361.3
CAD 400 million 2.25% notes due 2018⁽²⁾	297.6			289.0
CAD 500 million 2.75% notes due 2020⁽²⁾	372.0			361.3
CAD 500 million 2.84% notes due 2023⁽³⁾	372.0			—
CAD 500 million 3.44% notes due 2026⁽³⁾	372.0			—
$300 million 2.0% notes due 2017⁽⁴⁾	300.2			300.6
$500 million 1.45% notes due 2019⁽³⁾	500.0			—
$1.0 billion 2.10% notes due 2021⁽³⁾	1,000.0			—
$500 million 3.5% notes due 2022⁽⁴⁾	515.0			517.8
$2.0 billion 3.0% notes due 2026⁽³⁾	2,000.0			—
$1.1 billion 5.0% notes due 2042⁽⁴⁾	1,100.0			1,100.0
$1.8 billion 4.2% notes due 2046⁽³⁾	1,800.0			—
EUR 800 million 1.25% notes due 2024⁽³⁾	841.4			—
Term loan due 2019⁽⁵⁾	800.0			—
Term loan due 2021⁽⁵⁾	1,500.0			—
Other long-term debt	2.2			—
Less: unamortized debt discounts and debt issuance costs	(85.0		)	(21.3		)
Total long-term debt (including current portion)	12,059.4			2,908.7
Less: current portion of long-term debt	(671.7		)	—
Total long-term debt	$	11,387.7		$	2,908.7

Short-term borrowings:
Cash pool overdrafts⁽⁶⁾	$	2.6		$	18.7
Short-term facilities⁽⁷⁾	7.0			7.5
Other short-term borrowings	3.5			2.5
Current portion of long-term debt	671.7			—
Current portion of long-term debt and short-term borrowings	$	684.8		$	28.7

(1)

During the fourth quarter of 2010, Molson Coors International LP completed a CAD 500 million private placement in Canada due October 6, 2017. Prior to issuing the bond, we entered into forward starting interest rate transactions for a portion of the 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 offering and pricing, 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 $7.8 million which is being amortized over the term of the Canadian issued private placement and increases our effective cost of borrowing compared to the stated coupon rates by 0.23%.

(2)

On September 18, 2015, Molson Coors International, LP issued CAD 500 million 2.75% notes due September 18, 2020 ("CAD 500 million notes"), and CAD 400 million 2.25% notes due September 18, 2018 ("CAD 400 million notes", and together with the CAD 500 million notes, the "2015 Notes"). Prior to issuing the 2015 Notes, we entered into forward starting interest rate swap agreements to hedge the interest rate volatility on CAD 600 million of the 2015 Notes beginning in the second quarter of 2014. At the time of the issuance of the 2015 Notes, the government of Canada bond rates were trading at a yield lower than that locked in by the interest rate swaps, resulting in an aggregate realized loss of CAD 39.2 million ($29.5 million at settlement), which was recorded in other comprehensive income. A portion of this loss is being amortized into interest expense over the 5-year and 3-year terms of the respective 2015 Notes and will increase our effective cost of borrowing compared to the stated coupon rates by 0.65% on the CAD 500 million notes and 0.16% on the CAD 400 million notes. The remaining portion of the loss will be amortized on future debt issuances covering the full 10-year term of the interest rate swap agreements. The cash payment associated with the settlement of the forward starting interest rate swap agreements was recorded as an operating outflow within the other assets and liabilities line item on the consolidated statement of cash flows. See Note 16, "Derivative Instruments and Hedging Activities" for further details on the forward starting interest rate swaps.

(3)

On July 7, 2016, MCBC issued approximately $5.3 billion senior notes with portions maturing from July 15, 2019, through July 15, 2046 ("USD Notes"), and EUR 800.0 million senior notes maturing July 15, 2024 ("EUR Notes"), and Molson Coors International L.P., a Delaware limited partnership and wholly-owned subsidiary of MCBC ("Molson Coors International LP"), completed a private placement of CAD 1.0 billion senior notes maturing July 15, 2023, and July 15, 2026 ("CAD Notes"), in order to partially fund the financing of the Acquisition (USD Notes, EUR Notes and CAD notes, collectively, the "2016 Notes"). These issuances resulted in total proceeds of approximately $6.9 billion, net of underwriting fees and discounts of $36.5 million and $17.7 million, respectively. Total debt issuance costs capitalized in connection with these notes including underwriting fees, discounts and other financing related costs, were approximately $65 million and are being amortized over the respective terms of the 2016 Notes. The 2016 Notes began accruing interest upon issuance, with semi-annual payments due on the USD Notes and CAD Notes in January and July beginning in 2017, and annual interest payments due on the EUR Notes in July beginning in 2017.

Prior to issuing the EUR Notes and the CAD Notes, we entered into foreign currency forward agreements to economically hedge the foreign currency exposure of a portion of the respective notes, which were subsequently settled on July 7, 2016, concurrent with the issuance of the 2016 Notes. Additionally, upon issuance we designated the EUR Notes as a net investment hedge of our Europe business. See Note 16, "Derivative Instruments and Hedging Activities" for further details.

In order to maximize the yield on the cash received from the issuance of the 2016 Notes and the February 3, 2016, equity issuance, while maintaining the ability to readily access these funds, MCBC strategically invested the proceeds in various fixed rate deposit and money market accounts with terms of three months or less in anticipation of the Acquisition. Accordingly, we recorded interest income of $19.0 million for year ended December 31, 2016, within interest income (expense). The proceeds from our 2016 Notes and February 3, 2016, equity issuance were used to partially fund the Acquisition on October 11, 2016.

(4)

On May 3, 2012, we issued approximately $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 ("$300 million notes"). The 2022 senior notes were issued in an initial aggregate principal amount of $500 million at 3.5% interest and will mature on May 1, 2022 ("$500 million notes"). 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 approximately $1.9 billion, 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, were approximately $18.0 million and are being amortized over the term of the notes.

In the first quarter of 2015, we entered into interest rate swaps to economically convert our fixed rate $300 million notes to floating rate debt consistent with the interest rate swaps on our $500 million notes entered into during 2014. As a result of these hedge programs, the changes in fair value of the interest rate swaps and the offsetting changes in the fair value of our $300 million and $500 million notes attributable to the benchmark interest rate were recorded as unrealized positions in interest expense in our consolidated statement of operations. As a result of fair value hedge accounting, the carrying value of the $300 million and $500 million notes include an adjustment for the change in fair value. During the fourth quarter of 2015, we settled these interest rate swaps, at which time we ceased adjusting the carrying value of the related $300 million and $500 million notes for the fair value movements of these swaps. At the time of termination, cumulative adjustments to the carrying value of the notes were $0.7 million and $18.1 million representing the cash inflows upon termination related to the $300 million and $500 million notes, respectively. Beginning in the fourth quarter of 2015, we began amortizing these cumulative adjustments to interest expense over the remaining term of each respective note and will accordingly decrease the annual effective interest rate for the $300 million and $500 million notes for the remaining term of the notes by 0.16% and 0.56%, respectively. The impact of these swaps including amortization resulted in an effective interest rate on the $300 million and $500 million notes of 0.95% and 1.57%, respectively, for 2015. The fair value adjustments and subsequent amortization have been excluded from the aggregate principal debt maturities table presented below.

In the first quarter of 2015, we also entered into a cross currency swap with a total notional of EUR 265 million ($300 million upon execution) in order to hedge a portion of the foreign currency translational impacts of our European investment. As a result of this cross currency swap and the above mentioned interest rate swaps, we economically converted the $300 million and associated interest to a floating rate EUR denomination. During the fourth quarter of 2015, we voluntarily cash settled the EUR 265 million notional cross currency swap associated with the $300 million notes simultaneously with the voluntary settlement of the interest rate swaps discussed previously resulting in a separate cash inflow of $16.0 million. See Note 16, "Derivative Instruments and Hedging Activities" for further details.

(5)

In anticipation of the Acquisition, we entered into a term loan agreement during the fourth quarter of 2015, as further discussed below. On October 11, 2016, in connection with the closing of the Acquisition, we borrowed $1.0 billion under the 3-year tranche and $1.5 billion under the 5-year tranche, for an aggregate principal amount of $2.5 billion. Total debt issuance costs capitalized in connection with these term loans were $8.7 million and are being amortized to interest expense over each tranche's respective terms. We bear monthly interest on these term loans at the rate of 1.50% + 1-month LIBOR. The proceeds were used to partially fund the Acquisition and no additional amounts are available for borrowing under the term loan agreement. Additionally, during the fourth quarter of 2016, we made principal payments on our $1.0 billion 3-year tranche of $200.0 million and accordingly accelerated the related amortization. As of December 31, 2015, there were no outstanding borrowings on the term loan. For the years ended December 31, 2016 and December 31, 2015, $6.7 million and $0.1 million, respectively, was recorded to interest expense related to amortization of issuance and other financing costs associated with the term loan, including the accelerated amortization noted above of $0.6 million.


(6)	As of December 31, 2016, we had $2.6 million in bank overdrafts and $18.0 million in bank cash related to our cross-border, cross-currency cash pool for a net positive position of $15.4 million. As of December 31, 2015, we had $18.7 million in bank overdrafts and $39.6 million in bank cash related to our cross-border, cross-currency cash pool for a net positive position of $20.9 million.

(7)

We had total outstanding borrowings of $7.0 million and $7.5 million under our two JPY overdraft facilities as of December 31, 2016, and December 31, 2015, respectively. We had no outstanding borrowings under our CAD or GBP facilities as of December 31, 2016, or December 31, 2015. A summary of our short-term facility availability is presented below. See Note 18, "Commitments and Contingencies" for further discussion related to letters of credit.

- JPY 900 million overdraft facility at Japan base rate + 0.45%

- JPY 500 million overdraft facility at Japan base rate + 0.35%

- CAD 30.0 million line of credit at USD Prime or CAD Prime depending on the borrowing currency

- GBP 20.0 million line of credit consisting of a GBP 10 million overdraft facility at GBP LIBOR +1.5% and

- GBP 10 million uncommitted money market facility

Debt Fair Value Measurements