Debt

12 Months Ended

Dec. 31, 2016



Long-term debt
$ in millions	Interest Rate	Maturity	December 31, 2016			December 31, 2015
Term loan - rates from: 4.00% - 4.01% (a)		2022	$	445.0		$	—
First Mortgage Bonds	1.875%		—			445.0
Tax-exempt First Mortgage Bonds	4.8%	2036	100.0			100.0
Tax-exempt First Mortgage Bonds - rates from: 1.29% - 1.42% (a) and 1.13% - 1.17% (b)		2020	200.0			200.0
U.S. Government note	4.2%	2061	18.0			18.1
Capital leases			0.4			—
Unamortized deferred financing costs			(10.7		)	(5.0		)
Unamortized debt discounts and premiums, net			(5.5		)	(3.6		)
Total long-term debt at subsidiary			747.2			754.5

Bank term loan - rates from: 2.67% - 3.02% (a) and 2.44% - 2.67% (b)		2020	125.0			125.0
Senior unsecured bonds	6.5%		—			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 (c)	8.125%	2031	15.6			15.6
Unamortized deferred financing costs			(8.8		)	(11.1		)
Unamortized debt discounts and premiums, net			(0.6		)	(0.7		)
Subtotal			1,858.4			1,993.3
Less: current portion			(29.7		)	(572.8		)
Total			$	1,828.7		$	1,420.5


(a)	Range of interest rates for the year ended December 31, 2016.


(b)	Range of interest rates for the year ended December 31, 2015.


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

At December 31, 2016, maturities of long-term debt are summarized as follows:



Due during the years ending December 31,
$ in millions
2017	$	29.7
2018	29.6
2019	229.6
2020	254.6
2021	784.6
Thereafter	555.5
	1,883.6
Unamortized discounts and premiums, net	(6.1		)
Total long-term debt	$	1,877.5

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% tax-exempt First Mortgage Bonds due January 2028 and $41.3 million of DP&L's 4.8% tax-exempt First Mortgage 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, 2016, 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, 2016 or 2015. 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 tax-exempt First Mortgage Bonds due November 2040, terminated the amended standby letter of credit facilities that supported these tax-exempt First Mortgage Bonds, and called $137.8 million of 4.8% tax-exempt First Mortgage 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 a new variable interest rate tax-exempt Term Loan secured by First Mortgage Bonds in an equivalent amount. In connection with the sale of the new tax-exempt First Mortgage 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 November 21, 2016, the DP&L $200.0 million variable-rate Term Loan was hedged with floating for fixed rate interest rate swaps, reducing interest rate risk exposure for the term of the 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 AES Ohio Generation secured by mortgages on assets of AES Ohio Generation. At December 31, 2016, there were two letters of credit in the amount of $1.7 million outstanding under this facility, with the remaining $203.3 million of the revolving credit facility remaining available to DPL. Fees associated with this facility were not material during the years ended December 31, 2016 or 2015.

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 AES Ohio Generation secured by mortgages on assets of AES Ohio Generation. 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 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 6.5% Senior Notes due 2016 had an outstanding principal 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 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. On October 17, 2016, the remaining $57.0 million of outstanding principal was redeemed at par on their maturity date with cash on hand.

On August 24, 2016, DP&L refinanced its 1.875% First Mortgage Bonds Due 2016, with a variable rate Term Loan B of $445.0 million maturing on August 24, 2022 and secured by a pledge of DP&L First Mortgage Bonds. The variable rate on the loan is calculated based on LIBOR plus a spread of 3.25%, with a LIBOR floor of 0.75%. Up to the maturity date but not starting until March 31, 2017, the loan amortizes 0.25% of the initial principal balance quarterly, and contains covenants and restrictions that are generally consistent with existing DP&L credit agreements.

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 tax-exempt First Mortgage 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 consolidated 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.

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. As of December 31, 2016, DPL’s leverage ratio was at 1.45 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, 2016, 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).

DP&L’s revolving credit facility and Bond Purchase and Covenants Agreement (financing document entered into in connection with the issuance of the new $200.0 million of variable rate tax-exempt First Mortgage Bonds, dated as of August 1, 2015, containing representations, warranties and covenants consistent with those contained in DP&L's revolving credit facilities loan documents) have two financial covenants. First, prior to the date of completion of the separation of DP&L’s generation assets from its transmission and distribution assets, DP&L’s Total Debt to Total Capitalization may not be greater than 0.65 to 1.00 at any time; and, on and after the date of completion of the separation of DP&L’s generation assets from its transmission and distribution assets, DP&L’s Total Debt to Total Capitalization may not be greater than 0.75 to 1.00 at any time, except that after separation required compliance with this financial covenant shall be suspended (a) any time after separation during which DP&L maintains a rating of BBB- (or in the case of Moody’s Investors Service, Inc. Baa3) or higher with a stable outlook from at least one of Fitch Investors Service Inc., Standard & Poor’s Ratings Services or Moody’s Investors Service, Inc., as determined in accordance with the terms of the revolving credit facility or (b) for the time period January 1, 2017 to December 31, 2017 (as modified by the amendment described below) if during such time DP&L’s long-term indebtedness (as determined by the PUCO) is less than or equal to $750.0 million. The Total Debt to Capitalization covenant is calculated as the sum of DP&L’s current and long-term portion of debt, divided by the total of DP&L’s net worth and total debt.

On February 21, 2017, DP&L and its lenders amended DP&L’s revolving credit agreement and Bond Purchase and Covenant Agreement. These amendments modified the definition of Consolidated Net Worth in each agreement (which is used for measuring the Total Debt to Total Capitalization ratio under each of the agreements), to exclude, through March 31, 2018, non-cash charges related directly to impairments of coal generation assets in DP&L's fiscal quarter ending December 31, 2016 and thereafter. With this amendment DP&L’s Total Debt to Total Capitalization ratio for the period ending December 31, 2016 is 0.53 to 1.00, compared to 0.68 to 1.00 before the amendment. The amendment also changed, for each amendment, the dates after generation separation during which compliance with the Total Capitalization ratio detailed above shall be suspended if long-term indebtedness, as determined by the PUCO, is less than or equal to $750.0 million. As noted above this time period previously was January 1, 2017 to December 31, 2017, and is now the twelve months immediately subsequent to the separation of the generation assets from DP&L.

As of December 31, 2016, DP&L and DPL were in compliance with all debt covenants, including the financial covenants described above.

THE DAYTON POWER AND LIGHT COMPANY [Member]

Debt Instrument [Line Items]

Debt

Long-term debt is as follows:



Long-term debt
$ in millions	Interest Rate	Maturity	December 31, 2016			December 31, 2015
Term loan - rates from: 4.00% - 4.01% (a)		2022	$	445.0		$	—
First Mortgage Bonds	1.875%		—			445.0
Tax-exempt First Mortgage Bonds	4.8%	2036	100.0			100.0
Tax-exempt First Mortgage Bonds - rates from: 1.29% - 1.42% (a) and 1.13% - 1.17% (b)		2020	200.0			200.0
U.S. Government note	4.2%	2061	18.0			18.1
Capital leases			0.4			—
Unamortized deferred financing costs			(11.8		)	(6.2		)
Unamortized debt discount			(2.2		)	(0.2		)
Subtotal			749.4			756.7
Less: current portion			(4.7		)	(443.1		)
Total			$	744.7		$	313.6


(a)	Range of interest rates for the year ended December 31, 2016.


(b)	Range of interest rates for the year ended December 31, 2015.

At December 31, 2016, maturities of long-term debt are summarized as follows:



Due during the years ending December 31,
$ in millions
2017	$	4.7
2018	4.6
2019	4.6
2020	204.6
2021	4.5
Thereafter	540.0
	763.0
Unamortized discounts and premiums, net	(2.2		)
Total long-term debt	$	760.8

Significant transactions

On December 31, 2016, DP&L borrowed $5.0 million from DPL at an interest rate of 3.02%. The notes were due on or before January 30, 2017 and were repaid on the maturity date.

On August 24, 2016, DP&L refinanced its 1.875% First Mortgage Bonds due 2016, with a variable rate Term Loan B of $445.0 million maturing on August 24, 2022 and secured by a pledge of DP&L First Mortgage Bonds. The variable rate on the loan is calculated based on LIBOR plus a spread of 3.25%, with a LIBOR floor of 0.75%. Up to the maturity date but not starting until March 31, 2017, the loan amortizes 0.25% of the initial principal balance quarterly, and contains covenants and restrictions that are generally consistent with existing DP&L credit agreements.

On December 31, 2015, DP&L borrowed $35.0 million from DPL at an interest rate of 2.67%. The notes were due on or before December 31, 2016 and were repaid on January 29, 2016.

On July 31, 2015, DP&L refinanced its revolving credit facility. The new facility has a $175.0 million borrowing limit, 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 a maturity date of July 2020. At December 31, 2016, 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, 2016 or 2015. 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 tax-exempt First Mortgage Bonds due November 2040, terminated the amended standby letter of credit facilities that supported these tax-exempt First Mortgage Bonds, and called $137.8 million of 4.8% tax-exempt First Mortgage Bonds due January of 2034. DP&L used cash to redeem $37.8 million of these bonds and refinanced the $200.0 million balance, with a new variable interest rate tax-exempt Term Loan secured by First Mortgage Bonds in an equivalent amount. In connection with the sale of the new tax-exempt First Mortgage 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 November 21, 2016, the DP&L $200.0 million variable-rate Term Loan were hedged with floating for fixed rate interest rate swaps, reducing interest rate risk exposure for the term of the bonds.

On March 31, 2014, DP&L borrowed $15.0 million from DPL at an interest rate of LIBOR plus 2.0%. This note was due on or before April 30, 2014 and was repaid on April 30, 2014.

Debt covenants and restrictions

In connection with DP&L’s sale of $200.0 million of variable rate tax-exempt First Mortgage Bonds dated August 1, 2015, DP&L entered into an unsecured revolving credit agreement and a Bond Purchase and Covenants Agreement. These agreements contain representations, warranties, covenants and defaults consistent with those contained in the revolving credit facilities loan documents of DP&L and 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 interest charges for the same period.

As of December 31, 2016, DP&L was in compliance with all debt covenants, including the financial covenants described above and did not have any meaningful restrictions in its debt financing documents prohibiting dividends to its parent, DPL.