Note 8 – Debt



Long-term debt
$ in millions	Interest Rate	Maturity	December 31, 2015			December 31, 2014
First mortgage bonds	1.875%	2016	$	445.0		$	445.0
Pollution control series	4.7%	2028	—			35.3
Pollution control series	4.8%	2034	—			179.1
Pollution control series	4.8%	2036	100.0			100.0
Pollution control series - rates from: 0.02% - 0.12% and 0.04% - 0.15% (a)		2040	—			100.0
Pollution control series - rates from: 1.13% - 1.17%		2020	200.0			—
U.S. Government note	4.2%	2061	18.1			18.2
Unamortized debt discounts and premiums, net			(3.6		)	(2.8		)
Total long-term debt at subsidiary			759.5			874.8

Bank term loan - rates from: 2.44% - 2.67% and 2.41% - 2.44% (a)		2020	125.0			160.0
Senior unsecured bonds	6.5%	2016	130.0			130.0
Senior unsecured bonds	6.75%	2019	200.0			200.0
Senior unsecured bonds	7.25%	2021	780.0			780.0
Note to DPL Capital Trust II (b)	8.125%	2031	15.6			15.6
Unamortized debt discounts and premiums, net			(0.7		)	(0.7		)
Subtotal			$	2,009.4		$	2,159.7
Less: current portion			(574.9		)	(20.1		)
Total			1,434.5			2,139.6


(a)	Range of interest rates for the years ended December 31, 2015 and 2014, respectively.


(b)	Note payable to related party. See Note 13 – Related Party Transactions for additional information.

At December 31, 2015, maturities of long-term debt are summarized as follows:




Due within the years ending December 31,
$ in millions
2016	$	575.1
2017	25.1
2018	25.1
2019	225.2
2020	250.2
Thereafter	913.0
	2,013.7
Unamortized discounts and premiums, net	(4.3		)
Total long-term debt	$	2,009.4

Premiums or discounts recognized at the Merger date are amortized over the life of the debt using the effective interest method.

Significant transactions

On July 1, 2015, the $35.3 million of DP&L's 4.7% pollution control bonds due January 2028 and $41.3 million of DP&L's 4.8% pollution control bonds due January of 2034 were called at par and were redeemed with cash.

On July 31, 2015, DP&L refinanced its revolving credit facility. The new facility has a $175.0 million borrowing limit, with a $50.0 million letter of credit sublimit, a feature that provides DP&L the ability to increase the size of the facility by an additional $100.0 million and maturity date of July 2020. At December 31, 2015, there were two letters of credit in the amount of $1.4 million outstanding, with the remaining $173.6 million available to DP&L. Fees associated with this revolving credit facility were not material during the years ended December 31, 2015 or 2014. Prior to refinancing the facility on July 31, 2015, this facility had a $300.0 million borrowing limit, a five-year term expiring on May 10, 2018, a $100.0 million letter of credit sublimit and a feature that provided DP&L the ability to increase the size of the facility by an additional $100.0 million.

On August 3, 2015, DP&L called $100.0 million of variable rate pollution control bonds due November 2040, terminated the amended standby letter of credit facilities that supported these pollution control bonds, and called $137.8 million of 4.8% pollution control bonds due January of 2034. DP&L also used cash to redeem $37.8 million of these bonds and refinanced the $200.0 million balance, with new variable interest rate pollution control bonds secured by first mortgage bonds in an equivalent amount. In connection with the sale of the new pollution control bonds, DP&L entered into a certain Bond Purchase and Covenants Agreement, dated as of August 1, 2015, containing representations, warranties, covenants and defaults consistent with those contained in the revolving credit facilities loan documents of DP&L.

On September 19, 2013, DP&L closed a $445.0 million issuance of senior secured first mortgage bonds. These new bonds mature on September 15, 2016, and are secured by DP&L’s First & Refunding Mortgage. Substantially all property, plant and equipment of DP&L is subject to the lien of the First and Refunding Mortgage. Substantially concurrent with this transaction, DP&L redeemed $470.0 million of previously outstanding first mortgage bonds.

On July 31, 2015, DPL refinanced its revolving credit facility. The new facility has a total size of $205.0 million, a $200.0 million letter of credit sublimit, a feature that provides DPL the ability, under certain circumstances, to increase the size of the facility by an additional $95.0 million and a maturity date of July 2020. DPL's new credit facility also has a springing maturity feature providing that if, before July 1, 2019, DPL has not refinanced its senior unsecured bonds due October 2019 to have a maturity date that is at least six months later than July 31, 2020, then the maturity of this facility shall be July 1, 2019. This facility is secured by a pledge of common stock that DPL owns in DP&L, limited to the amount permitted to be pledged under certain Indentures dated October 3, 2011 and October 6, 2014 between DPL and Wells Fargo Bank, NA and U.S. Bank National Association, respectively, as Trustee and a limited recourse guarantee by DPLE secured by mortgages on assets of DPLE. At December 31, 2015, there were two letters of credit in the amount of $3.0 million outstanding under this facility, with the remaining $202.0 million of the revolving credit facility remaining available to DPL. Fees associated with this facility were not material during the years ended December 31, 2015 or 2014.

Prior to refinancing the facility on July 31, 2015, this facility was unsecured and had a borrowing limit of $100.0 million with a $100.0 million letter of credit sublimit, was able to be increased in size by DPL by an additional $50.0 million and had a five-year term expiring on May 10, 2018; with a springing maturity, meaning that if DPL had not refinanced its senior unsecured bonds due October 2016 before July 15, 2016, then the maturity of this facility would have been July 15, 2016.

Also on July 31, 2015, DPL refinanced its term loan, paying down the outstanding amount of $160.0 million using proceeds from the new term loan of $125.0 million and a combination of cash on hand and draws on short term credit facilities. The new term loan extends the term to July of 2020, pushing back required principal payments to 2017, and providing a mechanism for DPL to request additional term loans to refinance existing indebtedness. The new term loan has a springing maturity feature providing that if, before July 1, 2019, DPL has not refinanced its senior unsecured bonds due October 2019 to have a maturity date that is at least six months later than July 31, 2020, then the maturity of this facility shall be July 1, 2019. This facility is secured by a pledge of common stock that DPL owns in DP&L, limited to the amount permitted to be pledged under certain Indentures dated October 3, 2011 and October 6, 2014 between DPL and Wells Fargo Bank, NA and U.S. Bank National Association, respectively, as Trustee and a limited recourse guarantee by DPLE secured by mortgages on assets of DPLE. The new term loan has a springing maturity feature providing that if, before July 1, 2019, DPL has not refinanced its senior unsecured bonds due October 2019 to have a maturity date that is at least six months later than July 31, 2020, then the maturity of this facility shall be July 1, 2019.

In October 2014, DPL repaid $5.0 million of the note due to Capital Trust II, which used the funds to repurchase securities in the open market at a slight premium. Subsequent to repurchasing these securities, Capital Trust II immediately retired them.

In connection with the closing of the Merger, DPL assumed $1,250.0 million of debt that Dolphin Subsidiary II, Inc., a subsidiary of AES, issued on October 3, 2011 to partially finance the Merger. The $1,250.0 million was issued in two tranches. The first tranche was $450.0 million of five year senior unsecured notes issued with a 6.50% coupon maturing on October 15, 2016. The second tranche was $800.0 million of ten year senior unsecured notes issued with a 7.25% coupon maturing on October 15, 2021. In December 2013, DPL executed an Open Market Repurchase Program and successfully bought back $20.0 million of both the first and second tranche of senior unsecured notes and immediately retired them.

In October 2014, DPL closed a $200.0 million issuance of senior unsecured bonds. These new bonds were priced at 6.75% and mature on October 1, 2019. Proceeds from the issuance, in addition to a draw on the DPL revolving line of credit and cash on hand, were used to settle a tender offer for $300.0 million of the 6.50% senior unsecured notes maturing October 15, 2016. After this transaction, the DPL Inc. 6.5% Senior Notes due 2016 had an outstanding principle balance of $130.0 million

On January 6, 2016, DPL issued a Notice of Partial Redemption to the Trustee (Wells Fargo Bank N.A.) on the DPL Inc. 6.5% Senior Notes due 2016 (a component of the Dolphin Subsidiary II, Inc. debt). DPL notified the trustee that it was calling $73.0 million of the $130.0 million outstanding principal amount of these notes. The record date of this redemption was January 21, 2016, and the redemption date was February 5, 2016. These bonds were redeemed at par plus accrued interest and a make-whole premium of $2.4 million.

Debt covenants and restrictions

DP&L’s unsecured revolving credit agreement and Bond Purchase and Covenants Agreement (financing document entered into in connection with the sale of the new $200.0 million of variable rate pollution control bonds, dated as of August 1, 2015, containing representations, warranties, covenants and defaults consistent with those contained in the revolving credit facilities loan documents of DP&L) have two financial covenants. The first measures Total Debt to Total Capitalization and is calculated, at the end of each fiscal quarter, by dividing total debt at the end of the quarter by total capitalization at the end of the quarter. The second financial covenant measures EBITDA to Interest Expense. The EBITDA to Interest Expense ratio is calculated, at the end of each fiscal quarter, by dividing EBITDA for the four prior fiscal quarters by the consolidated interest charges for the same period.

DPL’s revolving credit agreement and term loan have two financial covenants. The first financial covenant, a Total Debt to EBITDA ratio, is calculated at the end of each fiscal quarter by dividing total debt at the end of the current quarter by consolidated EBITDA for the four prior fiscal quarters. The second financial covenant is an EBITDA to Interest Expense ratio that is calculated, at the end of each fiscal quarter, by dividing EBITDA for the four prior fiscal quarters by the consolidated interest charges for the same period.

As of December 31, 2015, DP&L and DPL were in compliance with all debt covenants, including the financial covenants described above.

DP&L does not have any meaningful restrictions in its debt financing documents prohibiting dividends to its parent, DPL. DPL’s secured revolving credit agreement, secured term loan, and senior unsecured notes due 2019 restrict dividend payments from DPL to AES, such that DPL cannot make dividend payments unless at the time of, and/or as a result of, the distribution, DPL’s leverage ratio does not exceed 0.67 to 1.00 and DPL’s interest coverage ratio is not less than 2.50 to 1.00 or, if such ratios are not within the parameters, DPL’s senior long-term debt rating from one of the three major credit rating agencies is at least investment grade. Further, the restrictions on the payment of distributions to a shareholder cease to be in effect if the three major credit rating agencies confirm that a lowering of DPL’s senior long-term debt rating below investment grade by the credit rating agencies would not occur without these restrictions. As of December 31, 2015, DPL’s leverage ratio was at 1.03 to 1.00 and DPL’s senior long-term debt rating from all three major credit rating agencies was below investment grade. As a result, as of December 31, 2015, DPL was prohibited under each of these agreements from making a distribution to its shareholder or making a loan to any of its affiliates (other than its subsidiaries).