Note 8 – Notes Payable, Long-term Debt, Commitments and Contingencies

Notes Payable

Notes payable outstanding under uncommitted and committed credit lines was $198 million at March 31, 2018, of which $136 million was related to foreign subsidiaries, with $75 million denominated in South African rand, $33 million denominated in Argentine pesos and $9 million denominated in Zambian kwacha. The weighted average interest rate for outstanding notes payable was 9.57% and 10.48% at March 31, 2018 and December 31, 2017, respectively. As of March 31, 2018, Seaboard had uncommitted credit lines totaling $568 million, of which $483 million related to foreign subsidiaries. The notes payable under the uncommitted credit lines are unsecured and do not require compensating balances. Also, Seaboard has a $100 million committed credit line secured by certain short-term investments, and $30 million was outstanding as of March 31, 2018. Seaboard’s borrowing capacity under its uncommitted and committed lines was reduced by $198 million drawn under the committed and uncommitted lines and letters of credit totaling $23 million as of March 31, 2018.

Long-term Debt

The following is a summary of long-term debt:



		March 31,		December 31,
(Millions of dollars)		2018		2017
Term Loan due 2022	$	481	$	484
Foreign subsidiary obligations due 2018 through 2023		65		52
Total long-term debt at face value		546		536
Current maturities of long-term debt and unamortized discount		(24)		(54)
Long-term debt, less current maturities and unamortized discount	$	522	$	482

The interest rate on the Term Loan due 2022 was 3.50% and 3.20% at March 31, 2018 and December 31, 2017, respectively. The weighted average interest rate on Seaboard’s foreign subsidiary obligations was 7.43% and 21.80% at March 31, 2018 and December 31, 2017, respectively. Seaboard was in compliance with all restrictive debt covenants relating to these agreements as of March 31, 2018.

In conjunction with the acquisition discussed in Note 10, Seaboard incurred a euro denominated note payable due to the sellers valued at $48 million at March 31, 2018. This foreign subsidiary obligation bears interest at an annual rate of 3.25%, with interest due annually on the anniversary date, until maturity on January 5, 2021. The discounted value of the note payable will be accreted to the face value over the term and recorded as additional interest expense.

Contingencies

On September 18, 2014, and subsequently in 2015 and 2016, Seaboard received a number of grand jury subpoenas and informal requests for information from the Department of Justice, Asset Forfeiture and Money Laundering Section (“AFMLS”), seeking records related to specified foreign companies and individuals. The companies and individuals as to which the requested records relate were not affiliated with Seaboard, although Seaboard has also received subpoenas and requests for additional information relating to an affiliate of Seaboard. During 2017, Seaboard received grand jury subpoenas requesting documents and information related to money transfers and bank accounts in the Democratic Republic of Congo (“DRC”) and other African countries and requests to interview certain Seaboard employees and to obtain testimony before a grand jury. Seaboard has retained outside counsel and is cooperating with the government’s investigation. It is impossible at this stage either to determine the probability of a favorable or unfavorable outcome or to estimate the amount of potential loss, if any, resulting from the government’s inquiry.

On September 19, 2012, the U.S. Immigration and Customs Enforcement (“ICE”) executed three search warrants authorizing the seizure of certain records from Seaboard’s offices in Merriam, Kansas and at the Seaboard Foods LLC employment office and the human resources department in Guymon, Oklahoma. The warrants generally called for the seizure of employment-related files, certain e-mails and other electronic records relating to Medicaid and Medicaid recipients, certain health care providers in the Guymon area, and Seaboard’s health plan and certain personnel issues. The U.S. Attorney’s Office for the Western District of Oklahoma (“USAO”), which has been leading the investigation, previously advised Seaboard that it intended to close its investigation and that no charges would be brought against Seaboard. However, discussions continue with the USAO, ICE and the Oklahoma Attorney General's office regarding the matter, including the possibility of a settlement. No proceedings have been filed or brought as of the date of this report. It is not possible at this time to determine whether a settlement will be reached or whether Seaboard will incur any material fines, penalties or liabilities in connection with this matter.

Seaboard is subject to various administrative and judicial proceedings and other legal matters related to the normal conduct of its business. In the opinion of management, the ultimate resolution of these items is not expected to have a material adverse effect on the condensed consolidated financial statements of Seaboard.

Contingent Obligations

Certain of the non-consolidated affiliates and third-party contractors who perform services for Seaboard have bank debt supporting their underlying operations. From time to time, Seaboard will provide guarantees of that debt in order to further Seaboard’s business objectives. Seaboard does not issue guarantees of third parties for compensation. As of March 31, 2018, guarantees outstanding to affiliates and third parties were not material. Seaboard has not accrued a liability for any of the affiliate or third-party guarantees as management considers the likelihood of loss to be remote. See Notes Payable above for discussion of letters of credit.