Note 11. Debt

The Company’s debt at December 31, 2017 and 2016 consisted of the following:

	2017			2016
Borrowings under the credit facilities	$	216.0		$	185.0
11.25% senior notes due February 1, 2019 _(a)		172.2			172.2
7.625% senior notes due June 15, 2020		238.4			350.0
7.875% senior notes due March 15, 2021		447.2			448.8
8.875% debentures due April 15, 2021		80.9			80.9
7.00% senior notes due February 15, 2022		140.0			140.0
6.50% senior notes due November 15, 2023		290.6			350.0
6.00% senior notes due April 1, 2024		298.3			400.0
6.625% debentures due April 15, 2029		157.9			199.5
8.820% debentures due April 15, 2031		69.0			69.0
Other _(b)		10.8			8.5
Unamortized debt issuance costs		(11.6	)		(16.5	)
Total debt		2,109.7			2,387.4
Less: current portion		(10.8	)		(8.2	)
Long-term debt	$	2,098.9		$	2,379.2

(a)

As of December 31, 2017 and 2016, the interest rate on the 11.25% senior notes due February 1, 2019 was 13.25%, the maximum amount of these rates as a result of credit ratings downgrades.

(b)

Includes miscellaneous debt obligations and capital leases.

The fair values of the senior notes and debentures, which were determined using the market approach based upon interest rates available to the Company for borrowings with similar terms and maturities, were determined to be Level 2 under the fair value hierarchy. The fair value of the Company’s total debt was greater than its book value by approximately $18.8 million and $4.3 million at December 31, 2017 and 2016, respectively.

On September 29, 2017, the Company entered into an asset-based revolving credit facility (the “Credit Agreement”) which amended and restated the Company’s prior $800.0 million senior secured revolving credit facility dated September 30, 2016. As a result of the amendment, the Company recognized a $6.2 million loss related to unamortized debt issuance costs and other expenses within loss on debt extinguishment in the Consolidated Statements of Operations for the year ended December 31, 2017. The Credit Agreement provides for a senior secured asset-based revolving credit facility of up to $800.0 million subject to a borrowing base. The amount available to be borrowed under the Credit Agreement is equal to the lesser of (a) $800.0 million and (b) the aggregate amount of accounts receivable, inventory, machinery and equipment and fee-owned real estate of the Company and certain of its domestic subsidiaries (the “Guarantors”) (collectively, the “Borrowing Base”), subject to certain eligibility criteria and advance rates. The aggregate amount of real estate, machinery and equipment that can be included in the Borrowing Base cannot exceed $200.0 million.

The Company’s obligations under the Credit Agreement are guaranteed by the Guarantors and are secured by a security interest in certain assets of the Company and its domestic subsidiaries, including accounts receivable, inventory, deposit accounts, securities accounts, investment property, machinery and equipment and, to the extent related to the foregoing, general intangibles, documents and instruments, as well as 65% of the equity interests of their first-tier foreign subsidiaries.

The Credit Agreement contains customary restrictive covenants, including a covenant which requires the Company to maintain a minimum fixed charge coverage ratio under certain circumstances. In addition, the Company’s ability to undertake certain actions, including, among other things, prepay certain junior debt, incur additional unsecured indebtedness and make certain restricted payments depends on satisfaction of certain conditions, including, among other things, meeting minimum availability thresholds under the Credit Agreement. The Credit Agreement generally allows annual dividend payments of up to $60.0 million in aggregate, though additional dividends may be allowed subject to certain conditions.

Borrowings under the Credit Agreement bear interest at a rate dependent on the average quarterly availability under the Credit Agreement and will be calculated according to a base rate or a Eurocurrency rate plus an applicable margin. The applicable margin for base rate loans ranges from 0.25% to 0.50% and the applicable margin for Eurocurrency loans ranges from 1.25% to 1.50%. In addition, a fee is payable quarterly on the unused portion of the amount available to be borrowed under the Credit Agreement. The fee accrues at a rate of either 0.25% or 0.375% depending upon the average usage of the facility.

The Credit Agreement is scheduled to mature on September 29, 2022, at which time all outstanding amounts under the Credit Agreement will be due and payable. Borrowings under the Credit Agreement may be used for working capital and general corporate purposes.

Based on the Company’s borrowing base as of December 31, 2017 and existing borrowings, the Company had approximately $549.5 million borrowing capacity available under the Credit Agreement.

The weighted average interest rate on borrowings under the Company’s current and prior credit facilities was 3.5%, 2.5% and 2.0% for the years ended December 31, 2017, 2016 and 2015, respectively.

On June 7, 2017, the Company repurchased $41.7 million of the 6.625% debentures due April 15, 2029, $59.4 million of the 6.50% senior notes due November 15, 2023 and $101.7 million of the 6.00% senior notes due April 1, 2024 using borrowings under the prior credit agreement. The repurchases resulted in a net gain of $0.8 million which was recognized within loss on debt extinguishment in the Consolidated Statements of Operations for the year ended December 31, 2017 related to the difference between the fair value of the debt repurchased and the principal outstanding, partially offset by the premiums paid, unamortized debt issuance costs and other expenses.

On May 22, 2017, certain third party financial institutions (such financial institutions collectively, the “Third Party Purchasers”), launched cash tender offers for certain of the Company’s outstanding debt securities, including the Company’s 7.625% senior notes due June 15, 2020 and 7.875% senior notes due March 15, 2021. On June 7, 2017, the Third Party Purchasers purchased $111.6 million in aggregate principal amount of the 7.625% senior notes due June 15, 2020 (the “Third Party Purchase Notes”). On June 21, 2017, the Company exchanged 6,143,208 of its retained shares of Donnelley Financial for the Third Party Purchase Notes. The Company cancelled the Third Party Purchase Notes on June 21, 2017. As a result, the Company recognized a $14.4 million loss on debt extinguishment in the Consolidated Statements of Operations during the year ended December 31, 2017 related to premiums paid, unamortized debt issuance costs and other expenses. In addition, the Company recognized a net realized gain of $92.4 million resulting from the disposition of these retained shares of Donnelley Financial common stock within investment and other income-net in the Consolidated Statements of Operations during the year ended December 31, 2017.

On August 4, 2017, the Company disposed of its remaining 99,594 shares of Donnelley Financial common stock in exchange for $1.9 million in aggregate principal of the Company’s 7.875% senior notes due March 15, 2021 which were cancelled. As a result, the Company recognized a $0.3 million loss on debt extinguishments in the Consolidated Statements of Operations during the year ended December 31, 2017, related to premiums paid, unamortized debt issuance costs and other expenses. In addition, the Company recognized a net realized gain of $1.6 million resulting from the disposition of these retained shares of Donnelley Financial common stock within investment and other income-net in the Consolidated Statements of Operations during the year ended December 31, 2017.

As of December 31, 2017, the Company had $149.1 million in other uncommitted credit facilities, primarily outside the U.S. (the “Other Facilities”). There were $139.2 million in outstanding letters of credit, bank guarantees and bank acceptance drafts which reduced availability, of which $34.5 million were issued under the Credit Agreement. Total borrowings under the Credit Agreement and the Other Facilities (the “Combined Facilities”) were $226.6 million and $192.5 million as of December 31, 2017 and 2016, respectively.

Cash on hand and borrowings under the prior credit facility were used to pay the $219.8 million of 8.6% senior notes that matured on August 15, 2016.

At December 31, 2017, the future maturities of debt, including capitalized leases, were as follows:

	Amount
2018	$	10.8
2019		172.2
2020		238.4
2021		529.1
2022		356.0
2023 and thereafter		816.1
Total ^(a)	$	2,122.6

(a)

Excludes unamortized debt issuance costs of $11.6 million and $1.3 million of bond discount which do not represent contractual commitments with a fixed amount or maturity date.

Spinoff Transactions

In connection with the spinoff transactions, the Company, Donnelley Financial and LSC executed various debt transactions in order to capitalize each company. As these debt transactions were executed in order to successfully complete the spinoff capitalization transactions, the Company has classified the corporate level debt repurchased, resulting losses on debt extinguishments and all related interest expense as discontinued operations or liabilities held for disposition.

On September 30, 2016, the Company’s then wholly-owned subsidiary Donnelley Financial issued senior notes and incurred a senior secured term loan B facility with total aggregate principal of $300.0 million and $350.0 million, respectively. Additionally on September 30, 2016, the Company’s then wholly-owned subsidiary LSC issued senior notes and incurred a senior secured term loan B facility with total aggregate principal of $450.0 million and $375.0 million, respectively. All of the related net proceeds were distributed to the Company or exchanged for debt in connection with the Separation. After the Separation, RRD has no obligations as it relates to these senior notes, senior secured term loan B facilities or any other LSC or Donnelley Financial indebtedness.

Additionally on September 30, 2016, the Company entered into an amended and restated credit agreement providing for $800.0 million in credit facilities, representing a reduction from the prior credit agreement which provided for $1.5 billion in credit facilities. As a result of the reduction in borrowing capacity, the Company recognized a $1.4 million loss related to unamortized debt issuance costs within loss from discontinued operations, net of tax, in the Consolidated Statements of Operations for the period ended December 31, 2016.

On August 31, 2016, the Company and certain third party financial institutions (such financial institutions collectively, the “Third Party Purchasers”), launched cash tender offers for certain of the Company’s outstanding debt securities, including the Company’s 6.125% senior notes due January 15, 2017 (the “2017 Notes”), 7.250% senior notes due May 15, 2018 the (“2018 Notes”), 8.250% senior notes due March 15, 2019 (the “2019 Notes”) and 7.000% senior notes due February 15, 2022 (the “2022 Notes”). On September 16, 2016, the Third Party Purchasers purchased $274.4 million in aggregate principal amount of the 2017 Notes and 2018 Notes (the “Third Party Purchase Notes”). On September 30, 2016, the Company purchased approximately $503.6 million in aggregate principal amount of the 2017 Notes, the 2018 Notes, the 2019 Notes and the 2022 Notes (the “Company Purchase Notes”), and exchanged $300.0 million in aggregate principal amount of the Donnelley Financial senior notes for the Third Party Purchase Notes. The Company cancelled the Third Party Purchase Notes and Company Purchase Notes on September 30, 2016. As a result, the Company recognized an $85.3 million loss on debt extinguishments within loss from discontinued operations, net of tax, in the period ending December 31, 2016 related to premiums and other related transaction costs.

On October 6, 2016, the Company redeemed the outstanding $45.8 million principal amount of the 2018 Notes and the outstanding $21.3 principal amount of the 2019 Notes plus accrued and unpaid interest. Additionally, the Company redeemed the outstanding $155.2 million aggregate principal of the 2017 Notes on November 2, 2016. As a result, the Company recognized an additional $10.8 million loss on debt extinguishments within net earnings of discontinued operations in the fourth quarter of 2016.

Interest expense

The following table summarizes interest expense included in the Consolidated Statements of Operations:

	2017			2016			2015
Interest incurred	$	185.0		$	206.1		$	211.6
Less: interest income		(2.8	)		(4.6	)		(3.7	)
Less: interest capitalized as property, plant and equipment		(2.6	)		(2.8	)		(3.8	)
Interest expense, net	$	179.6		$	198.7		$	204.1

Interest paid, net of interest capitalized, was $177.6 million, $280.1 million and $274.7 million for the years ended December 31, 2017, 2016 and 2015, respectively.