Debt

Credit Facilities

Term Loan. 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 “Term Loan”), and a $250 million secured revolving credit facility (the “Original Revolver”). A portion of the Original Revolver could be used to issue letters of credit of up to $50 million, subject to the availability of the Original Revolver.

Borrowings under the Term Loan bear interest, payable on a quarterly basis, at an annual rate equal to an applicable margin plus, at our option, (A) a base rate determined by reference to the highest of (a) the interest rate in effect determined by the administrative agent as its “prime rate,” (b) the federal funds rate plus 0.5%, and (c) the London InterBank Offered Rate (“LIBOR”) for an interest period of one month plus 1.00%, or (B) LIBOR. LIBOR borrowings under the Term Loan are subject to a LIBOR floor of 0.75%. At June 30, 2016, the Term Loan bore interest at 3.25%. In certain circumstances, our applicable interest rate under the Term Loan will increase.

In addition to paying interest on outstanding principal balances under the Term Loan, we were required to pay the lenders a commitment fee on unused commitments under the Original Revolver. Commitment fees are recorded within “Interest and other expense (income), net” in our Condensed Consolidated Statement of Operations. We are also required to pay customary letter of credit fees, if any, and agency fees.

The terms of the Credit Agreement require quarterly principal repayments of 0.25% of the Term Loan’s original principal amount, with the balance due on the maturity date. On February 11, 2014, we made a voluntary repayment of $375 million on our Term Loan. This repayment satisfied the required quarterly principal repayments for the entire term of the Credit Agreement. On February 11, 2015, we made an additional voluntary repayment of $250 million on our Term Loan. On February 25, March 31, and May 26, 2016, we made additional voluntary repayments of $500 million, $250 million, and $800 million, respectively, on our Term Loan.

Tranche A Term Loans. In conjunction with the King Acquisition, the Company entered into three Amendments to the Credit Agreement (the “Amendments”). The Amendments, among other things, provided for incremental term loans in the form of Tranche A Term Loans in an aggregate principal amount of approximately $2.3 billion. The proceeds were issued and provided on February 23, 2016, upon successful closing of the King Acquisition, 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 A Term Loan in the aggregate principal amount of $250 million, and the total proceeds from the incremental borrowing were used to make the March 31, 2016 voluntary prepayment on our Term Loan as discussed above.

The Tranche A Term Loans are scheduled to mature on October 11, 2020, and 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 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 is subject to a floor of 0% and the base rate is subject to an effective floor of 1.00%. The applicable interest margin for Tranche A Term Loans ranges from 1.50% to 2.25% for LIBOR borrowings and from 0.50% to 1.25% for base rate borrowings and is determined by reference to a pricing grid based on the Company’s Consolidated Total Net Debt Ratio (as defined in the Credit Agreement).

The Tranche A Term Loans require quarterly principal payments of 0.625% of their stated principal amount commencing June 30, 2016, with increases to 1.250% starting on June 30, 2019, and 3.125% starting on June 30, 2020, with the remaining balance payable on the Tranche A Term Loans’ scheduled maturity date of October 11, 2020. Voluntary prepayments of the Tranche A Term Loans are permitted at any time, in minimum principal amounts, without premium or penalty.

The Tranche A Term Loans are subject to a financial maintenance covenant requiring the Company to maintain a maximum Consolidated Total Net Debt Ratio (as defined in the Credit Agreement) of 4.00 to 1.00, which will decrease to 3.50 to 1.00 (I) after the sixth full fiscal quarter after the Tranche A Term Loans are made or (II) if the Collateral Suspension (as defined in the Credit Agreement) occurs prior to the date falling 18 months after the Tranche A Term Loans are made, on the later of (x) the last day of the fourth full fiscal quarter after the Tranche A Term Loans are made and (y) the last day of the fiscal quarter in which the Collateral Suspension occurs.

The Tranche A Term Loans are secured by the same collateral and guaranteed by the same guarantors that secure and guarantee the Term Loan. The other terms of the Tranche A Term Loans are also generally the same as the terms of the Term Loan. At June 30, 2016, the Tranche A Term Loans bore interest at 2.46%. In certain circumstances, our applicable interest rate under the Tranche A Term Loans will increase.

2015 Revolving Credit Facility. As part of the Amendments, upon the closing of the King Acquisition, the Company’s Original Revolver under the Credit Agreement in an aggregate principal amount of $250 million was replaced with a new revolving credit facility under the Credit Agreement in the same aggregate principal amount (the “2015 Revolving Credit Facility,” and, together with the Term Loan and Tranche A Term Loans, the "Credit Facilities").

Borrowings under the 2015 Revolving Credit Facility 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 2015 Revolving Credit Facility may be used for letters of credit.

The 2015 Revolving Credit Facility is scheduled to mature on October 11, 2020. The interest rate options available to the Company for borrowings under the 2015 Revolving Credit Facility are the same as those available to the Company for the Tranche A Term Loans. Additionally, the 2015 Revolving Credit Facility is subject to the same financial maintenance covenant and is secured by the same collateral and guaranteed by the same guarantors that secure and guarantee the Tranche A Term Loans. The other terms of the 2015 Revolving Credit Facility are generally the same as the terms of the Original Revolver. To date, we have not drawn on the 2015 Revolving Credit Facility.

The Credit Facilities are guaranteed by certain of the Company’s U.S. subsidiaries, whose assets represent approximately 66% of our consolidated total assets. The Credit Agreement contains 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 mergers and acquisitions. A violation of any of these covenants could result in an event of default under the Credit Agreement. Upon the occurrence of such event of default or certain other customary events 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 June 30, 2016.

Unsecured Senior Notes

On September 19, 2013, we issued, at par, $1.5 billion of 5.625% unsecured senior notes due September 2021 (the “2021 Notes”) and $750 million of 6.125% unsecured senior notes due September 2023 (the “2023 Notes” and, together with the 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 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. The Notes are guaranteed on a senior basis by certain of our U.S. subsidiaries. The Notes and related guarantees are not secured and are effectively subordinated to any of the Company’s existing and future indebtedness that is secured, including the Credit Facilities. The 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 mergers and acquisitions. The Company was in compliance with the terms of the Notes as of June 30, 2016.

Interest on the Notes is payable semi-annually in arrears on March 15 and September 15 of each year. As of June 30, 2016, and December 31, 2015, we had interest payable of $38 million related to the Notes, recorded within “Accrued expenses and other liabilities” in our Condensed Consolidated Balance Sheet.

We may redeem the 2021 Notes on or after September 15, 2016, and 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. At any time prior to September 15, 2016, with respect to the 2021 Notes, and at any time prior to September 15, 2018, with respect to the 2023 Notes, we may also redeem some or all of the Notes by paying a “make-whole premium,” plus 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 each of the 2021 Notes and 2023 Notes outstanding with the net cash proceeds from such offerings. The Notes are repayable, in whole or in part and at the option of the holders, upon the occurrence of a change in control and a ratings downgrade, at a purchase price equal to 101% of principal, plus accrued and unpaid interest. These redemption options are considered clearly and closely related to the Notes and are not accounted for separately upon issuance.

Debt Discounts and Issuance Costs

Fees associated with the closing of the Term Loan, Tranche A Term Loans, and the Notes 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 Condensed Consolidated Statement of Operations.

In connection with the debt financing for the King Acquisition, we incurred $38 million of issuance costs that were capitalized and recorded within "Current portion of long-term debt, net" and "Long-term debt, net" in our Condensed Consolidated Balance Sheet. The amortization of these capitalized costs was not material to our condensed consolidated statement of operations for the three and six months ended June 30, 2016.

We classified and presented unamortized deferred financing costs associated with the Term Loan, Tranche A Term Loans, and the Notes as a reduction of their respective gross carrying amounts for all periods presented in accordance with a recent accounting standard that became effective on January 1, 2016. Refer to Note 15 for further discussion of the recent accounting standard.

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



	At June 30, 2016
	Gross Carrying Amount			Unamortized Discount and Deferred Financing Costs			Net Carrying Amount
Term Loan	$	319		$	(3	)	$	316
Tranche A Term Loans	2,534			(36		)	2,498
2021 Notes	1,500			(20		)	1,480
2023 Notes	750			(11		)	739
Total debt	$	5,103		$	(70	)	$	5,033
Less: current portion of long-term debt	(64		)	8			(56		)
Total long-term debt	$	5,039		$	(62	)	$	4,977



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

For the three and six months ended June 30, 2016: interest expense was $55 million and $107 million, respectively; amortization of the debt discount for the Credit Facilities and Notes was $6 million and $10 million, respectively; and commitment fees for the Original Revolver and the 2015 Revolving Credit Facility were not material. For the three and six months ended June 30, 2015: interest expense was $48 million and $97 million, respectively; amortization of the debt discount for the Credit Facilities and Notes was $2 million and $3 million, respectively; and commitment fees for the Original Revolver and the 2015 Revolving Credit Facility were not material.

As of June 30, 2016, 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,
2016 (remaining six months)	$	32
2017	64
2018	64
2019	112
2020	2,581
Thereafter	2,250
Total	$	5,103

As of June 30, 2016, and December 31, 2015, the carrying value of the Term Loan and Tranche A Term Loans approximates the 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 2021 Notes and 2023 Notes were $1,571 million, and $811 million, respectively, as of June 30, 2016. Based on Level 2 inputs, the fair values of the 2021 Notes and 2023 Notes were $1,571 million and $795 million, respectively, as of December 31, 2015.

Debt Repayments

On February 2, 2016, the Board of Directors authorized debt repayments of up to $1.5 billion of our outstanding debt during 2016. For the six months ended June 30, 2016, we have made prepayments to reduce our total outstanding term loans by $1.3 billion.