Debt

Credit Facilities

On October 11, 2013, we entered into a credit agreement (the "Credit Agreement") for a $2.5 billion secured term loan facility maturing in October 2020 (the "Original Term Loan"), and a $250 million secured revolving credit facility (the "Original Revolver"). As of December 31, 2015, as a result of repayments and prepayments during the prior periods, we had $1.9 billion outstanding under the Original Term Loan.

In conjunction with the King Acquisition, we entered into three amendments to the Credit Agreement (the “Amendments”). The Amendments, among other things, provided for an incremental tranche of term loans "A" in an aggregate principal amount of approximately $2.3 billion. The proceeds were provided on February 23, 2016 and were used to fund the King Acquisition. On March 31, 2016, we entered into a fourth amendment to the Credit Agreement which provided for an incremental tranche of term loans "A" in the aggregate principal amount of $250 million (together with the $2.3 billion tranche of term loans "A", the “Original TLA”); the proceeds from the incremental borrowing were used to make a voluntary prepayment on our Original Term Loan on March 31, 2016. In addition to this prepayment, we made voluntary prepayments on our Original Term Loan of $500 million and $800 million on February 25 and May 26, 2016, respectively.

On August 23, 2016 we entered into a fifth amendment to the Credit Agreement (the “Fifth Amendment”) that provided for a new tranche of term loans "A" of approximately $2.9 billion (the “2016 TLA”) and an amended revolving credit facility of $250 million (the “Revolver” and together with the 2016 TLA, the “Credit Facilities”). The proceeds from the 2016 TLA were primarily used to pay off the remaining outstanding principal balance on the Original Term Loan of $319 million and the Original TLA of $2.5 billion. As a result of the payments to extinguish the Original Term Loan and Original TLA, we wrote-off unamortized discount and deferred financing costs of $10 million, which is included in “Loss on extinguishment of debt” in the consolidated statements of operations. The remaining unamortized discount and deferred financing costs were deferred, along with new fees paid to the 2016 TLA lenders, and will continue to be amortized over the maturity of the 2016 TLA. As a result of the Fifth Amendment, both the 2016 TLA and the Revolver became unsecured loans. As described below, the 2016 TLA was fully prepaid in February 2017. The Revolver is scheduled to mature on August 23, 2021. Debt discounts and deferred financing costs incurred in relation to the Fifth Amendment were not material.

Borrowings under the Revolver may be borrowed, repaid, and re-borrowed by the Company, and are available for working capital and other general corporate purposes. Up to $50 million of the Revolver may be used for letters of credit. To date, we have not drawn on the Revolver. Borrowings under the 2016 TLA and the Revolver will bear interest, at the Company’s option, at either (a) a base rate equal to the highest of (i) the federal funds rate, plus 0.5%, (ii) the prime commercial lending rate of Bank of America, N.A. and (iii) the London Interbank Offered Rate (“LIBOR”) for an interest period of one month beginning on such day plus 1.00%, or (b) LIBOR, in each case, plus an applicable interest margin. LIBOR will be subject to a floor of 0% and the base rate will be subject to an effective floor of 1.00%. The applicable interest margin for borrowings under the 2016 TLA and Revolver will range from 1.125% to 2.00% for LIBOR borrowings and from 0.125% to 1.00% for base rate borrowings and will be determined by reference to a pricing grid based on the Company’s credit ratings. At December 31, 2016, the 2016 TLA bore interest at 2.02%.

The Credit Agreement requires quarterly principal payments of 0.625% of the stated principal amount of the 2016 TLA commencing on September 30, 2016, with increases to 1.250% starting on September 30, 2019 and 3.125% starting on September 30, 2020, with the remaining balance payable on the 2016 TLA’s scheduled maturity date of August 23, 2021. On September 30, 2016, in addition to the required quarterly repayment of $18 million, we made a voluntary prepayment on our 2016 TLA of $167 million. These payments satisfied the required quarterly principal repayments through December 31, 2018.

The Company is subject to a financial covenant requiring the Company’s Consolidated Total Net Debt Ratio (as defined in the Credit Agreement) not to exceed (i) 4.00:1.00 on or prior to March 31, 2017, and (ii) thereafter, 3.50:1.00. The Fifth Amendment contains other covenants that are customary for issuers with similar credit ratings. A violation of any of these covenants could result in an event of default under the Credit Agreement. Upon the occurrence of an event of default, payment of any outstanding amounts under the Credit Agreement may be accelerated, and the lenders’ commitments to extend credit under the Credit Agreement may be terminated. In addition, an event of default under the Credit Agreement could, under certain circumstances, permit the holders of other outstanding unsecured debt, including the debt holders described below, to accelerate the repayment of such obligations. The Company was in compliance with the terms of the Credit Facilities as of December 31, 2016.

As of December 31, 2016, the Credit Facilities were guaranteed by certain of our U.S. subsidiaries, whose assets represented approximately 67% of our consolidated assets.

On February 3, 2017, we entered into a sixth amendment to our Credit Agreement. The amendment (i) provided for a new tranche of term loans “A” in an aggregate principal amount of $2.55 billion (the "2017 TLA") and (ii) released each of our subsidiary guarantors from their respective guarantee provided under the Credit Agreement. All proceeds of the 2017 TLA, together with additional cash funds on hand, were used to fully prepay the 2016 TLA outstanding under the Credit Agreement immediately prior to the effectiveness of the sixth amendment, together with all accrued and unpaid interest thereon. The terms of the 2017 TLA, other than the absence of guarantees, are generally the same as the terms of the 2016 TLA.

On February 2, 2017, our Board of Directors authorized repayments of up to $500 million of the company’s outstanding debt during 2017. During February 2017, we made voluntary prepayments on our term loans of $500 million, inclusive of $139 million used to fully prepay the 2016 TLA as discussed above. The voluntary prepayment satisfied the remaining required quarterly principal repayments for the entire term of the Credit Agreement.

Unsecured Senior Notes

On September 19, 2013, we issued, at par, $1.5 billion of 5.625% unsecured senior notes due September 2021 (the "Original 2021 Notes") and $750 million of 6.125% unsecured senior notes due September 2023 (the "2023 Notes" and, together with the Original 2021 Notes, the "Notes") in a private offering to qualified institutional buyers made, in accordance with Rule 144A under the Securities Act of 1933, as amended (the "Securities Act").

The Original 2021 Notes became eligible for redemption on September 15, 2016 (and, as described below, were redeemed on October 19, 2016). We may redeem the 2023 Notes on or after September 15, 2018, in whole or in part on any one or more occasions, at specified redemption prices, plus accrued and unpaid interest. In addition, we may redeem some or all of the 2023 Notes prior to September 15, 2018, at a price equal to 100% of the aggregate principal amount thereof plus a “make-whole premium” and accrued and unpaid interest. Further, upon the occurrence of one or more qualified equity offerings, we may also redeem up to 35% of the aggregate principal amount of the 2023 Notes outstanding with the net cash proceeds from such offerings.

On September 19, 2016, we issued $650 million of 2.3% unsecured senior notes due September 2021 (the “New 2021 Notes”) and $850 million of 3.4% unsecured senior notes due September 2026 (the “2026 Notes” and, together with the New 2021 Notes, the “New Notes”) in a private offering made in accordance with Rule 144A and Regulation S under the Securities Act.

In connection with the issuance of the New Notes, we entered into a registration rights agreement (the “Registration Rights Agreement”), among the Company, the subsidiary guarantors, and the representatives of the initial purchasers of the New Notes. Under the Registration Rights Agreement, we are required to use commercially reasonable efforts to within one year of the issue date of the New Notes, among other things, (1) file a registration statement with respect to an offer to exchange each series of the New Notes for new notes that are substantially identical in all material respects, (except for the provisions relating to the transfer restrictions and payment of additional interest) and (2) cause the registration statement to be declared effective by the SEC under the Securities Act.

We may redeem some or all of the New 2021 Notes prior to August 15, 2021 and some or all of the 2026 Notes prior to June 15, 2026, in each case at a price equal to 100% of the aggregate principal amount thereof plus a “make-whole” premium and accrued and unpaid interest. In addition, we may redeem the New 2021 Notes on or after August 15, 2021, and the 2026 Notes on or after June 15, 2026, in each case in whole or in part on any one or more occasions and at a price equal to 100% of the aggregate principal amount thereof plus accrued and unpaid interest.

Upon the occurrence of certain change of control events, we will be required to offer to repurchase the 2023 Notes and New Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest. These repurchase requirements are considered clearly and closely related to the 2023 Notes and New Notes and are not accounted for separately upon issuance.

The 2023 Notes and New Notes are general senior obligations of the Company and rank pari passu in right of payment to all of the Company’s existing and future senior indebtedness, including the Credit Facilities described above. As of December 31, 2016, the 2023 Notes and New Notes were guaranteed on a senior basis by certain of our U.S. subsidiaries. Pursuant to the terms of the indentures underlying the 2023 Notes and New Notes, the guarantees by certain subsidiaries were automatically released when the 2017 TLA guarantees were removed in connection with the sixth amendment to the Credit Agreement. The 2023 Notes and New Notes are not secured and are effectively subordinated to any of the Company’s existing and future indebtedness that is secured.

On October 19, 2016, we redeemed the Original 2021 Notes in full for $1.6 billion, which resulted in a loss on extinguishment of approximately $82 million, comprised of a premium payment of $63 million and write off of unamortized discount and financing costs of $19 million. This loss is included in “Loss on extinguishment of debt” in the consolidated statements of operations.

The 2023 Notes contain customary covenants that place restrictions in certain circumstances on, among other things, the incurrence of debt, granting of liens, payment of dividends, sales of assets, and certain merger and consolidation transactions. The New Notes contain customary covenants that place restrictions in certain circumstances on, among other things, the incurrence of secured debt, entry into sale or leaseback transactions, and certain merger or consolidation transactions. The Company was in compliance with the terms of the 2023 Notes and the New Notes as of December 31, 2016.

Interest on the 2023 Notes and New Notes is payable semi-annually in arrears on March 15 and September 15 of each year, and is recorded within "Accrued expenses and other liabilities" in our consolidated balance sheets. As of December 31, 2016, we had interest payable of $13 million and $12 million, related to the 2023 Notes and New Notes, respectively. As of December 31, 2015, we had interest payable of $38 million related to the Notes.

Interest expense and financing costs

Fees and discounts associated with the closing of our debt instruments are recorded as debt discount, which reduces their respective carrying values, and is amortized over their respective terms. Amortization expense is recorded within “Interest and other expense (income), net” in our consolidated statements of operations.

In connection with the debt financing for the Original TLA and New Notes offering, we incurred $38 million and $17 million of discounts and financing costs, respectively, that were capitalized and recorded within “Long-term debt, net” in our consolidated balance sheet. New lender fees and deferred financing costs related to the 2016 TLA were not material.

For the years ended December 31, 2016, 2015, and 2014: interest expense was $197 million, $193 million, and $201 million, respectively; amortization of the debt discount and deferred financing costs was $20 million, $7 million, and $7 million, respectively; and commitment fees for the Revolver were not material.

A summary of our debt is as follows (amounts in millions):



	December 31, 2016
	Gross Carrying Amount		Unamortized Discount and Deferred Financing Costs			Net Carrying Amount
2016 TLA	$	2,690	$	(27	)	$	2,663
New 2021 Notes	650		(5		)	645
2023 Notes	750		(11		)	739
2026 Notes	850		(10		)	840
Total long-term debt	$	4,940	$	(53	)	$	4,887



	December 31, 2015
	Gross Carrying Amount		Unamortized Discount and Deferred Financing Costs			Net Carrying Amount
Original Term Loan	$	1,869	$	(11	)	$	1,858
Original 2021 Notes	1,500		(22		)	1,478
2023 Notes	750		(12		)	738
Total long-term debt	$	4,119	$	(45	)	$	4,074

As of December 31, 2016, without consideration to the voluntary prepayments made in February 2017, as discussed above, the scheduled maturities and contractual principal repayments of our debt for each of the five succeeding years are as follows (amounts in millions):



For the year ending December 31,
2017	$	—
2018	—
2019	103
2020	252
2021	2,985
Thereafter	1,600
Total	$	4,940

As of December 31, 2016 and 2015, the carrying values of the 2016 TLA and the Original Term Loan approximate their fair value, based on Level 2 inputs (observable market prices in less than active markets), as the interest rate is variable over the selected interest period and is similar to current rates at which we can borrow funds. Based on Level 2 inputs, the fair values of the 2023 Notes, New 2021 Notes, and 2026 Notes were $818 million, $635 million, and $808 million, respectively, as of December 31, 2016. Based on Level 2 inputs, the fair values of the Original 2021 Notes and 2023 Notes were $1,571 million and $795 million, respectively, as of December 31, 2015.