Debt

12 Months Ended

Jul. 31, 2017

Short-term borrowings

Ferrellgas classified a portion of its secured credit facility borrowings as short-term because it was used to fund working capital needs that management had intended to pay down within the 12 month period following each balance sheet date. As of July 31, 2017 and 2016, $59.8 million and $101.3 million, respectively, were classified as short-term borrowings. For further discussion see the secured credit facility section below.

Long-term debt

Long-term debt consists of the following:



	2017			2016
Senior notes
Fixed rate, 6.50%, due 2021 (1)	$	500,000		$	500,000
Fixed rate, 6.75%, due 2023 (4)	500,000			500,000
Fixed rate, 6.75%, due 2022, net of unamortized premium of $3,166 and $4,008 at 2017 and 2016, respectively (3)	478,166			479,008
Fixed rate, 8.625%, due 2020, net of unamortized discount of $5,976 and $0 at 2017 and 2016, respectively (2)	351,024			182,000
Fair value adjustments related to interest rate swaps	471			5,830

Secured credit facility
Variable interest rate, expiring October 2018 (net of $59.8 million and $101.3 million classified as short-term borrowings at July 31, 2017 and 2016, respectively)	185,719			293,109

Notes payable
12.0% and 11.8% weighted average interest rate at July 31, 2017 and 2016, respectively, due 2018 to 2022, net of unamortized discount of $1,128 and $1,566 at July 31, 2017 and 2016, respectively	5,958			8,484
Total debt, excluding unamortized debt issuance costs	2,021,338			1,968,431
Unamortized debt issuance costs	(22,965		)	(23,175		)
Less: current portion, included in other current liabilities on the consolidated balance sheets	2,578			3,921
Long-term debt	$	1,995,795		$	1,941,335

(1)

During November 2010, Ferrellgas issued $500.0 million in aggregate principal amount of 6.50% senior notes due 2021 at an offering price equal to par. These notes are general unsecured senior obligations of Ferrellgas and are effectively junior to all future senior secured indebtedness of Ferrellgas, to the extent of the value of the assets securing the debt, and are structurally subordinated to all existing and future indebtedness and obligations of the operating partnership. The senior notes bear interest from the date of issuance, payable semi-annually in arrears on May 1 and November 1 of each year. The outstanding principal amount is due on May 1, 2021. Ferrellgas would incur prepayment penalties if it were to repay the notes prior to May 2019.

(2)

During January 2017, Ferrellgas issued and sold, in a private placement offering with registration rights, $175.0 million in aggregate principal amount of additional 8.625% unsecured senior notes due 2020, issued at 96% of par. Ferrellgas contributed the net proceeds from the offering of approximately $166.1 million to the operating partnership, which used such amounts to repay borrowings under its secured credit facility. In August 2017, Ferrellgas completed an offer to exchange $175.0 million principal amount of its 8.625% unsecured senior notes due 2020, which were registered under the Securities Act of 1933, as amended, for a like principal amount of its outstanding and unregistered 8.625% unsecured senior notes due 2020. During April 2010, Ferrellgas issued $280.0 million of its fixed rate senior notes. During March 2011, Ferrellgas redeemed $98.0 million of these fixed rate senior notes. The unsecured senior notes bear interest from the date of issuance, payable semi-annually in arrears on June 15 and December 15 of each year. Ferrellgas would incur prepayment penalties if it were to repay the note prior to June 2018.

(3)

During November 2013, Ferrellgas issued $325.0 million in aggregate principal amount of 6.75% senior notes due 2022 at an offering price equal to par. Ferrellgas received $319.3 million of net proceeds after deducting underwriters' fees. Ferrellgas used the net proceeds to redeem all of its $300.0 million 9.125% fixed rate senior notes due October 1, 2017. Ferrellgas used the remaining proceeds to pay the related $14.7 million make whole and consent payments, $3.3 million in interest payments and to reduce outstanding indebtedness under the secured credit facility. During June 2014, Ferrellgas issued an additional $150.0 million in aggregate principal amount of 6.75% senior notes due 2022 at an offering price equal to 104% of par. Ferrellgas used the net proceeds for general corporate purposes, including to repay indebtedness under its secured credit facility and to pay related transaction fees and expenses. Ferrellgas would incur prepayment penalties if it were to repay the notes prior to November 2019.

(4)

During June 2015, Ferrellgas issued $500.0 million in aggregate principal amount of 6.75% senior notes due 2023 at an offering price equal to par. The senior notes bear interest from the date of issuance, payable semi-annually in arrears on June 15 and December 15 of each year. The outstanding principal amount is due on June 15, 2023. Ferrellgas received $491.3 million of net proceeds after deducting underwriters' fees. Ferrellgas used the net proceeds to fund a portion of the cash portion of the consideration for the acquisition of the outstanding membership interests in Bridger Logistics, LLC and its subsidiaries with remaining amounts being used to repay outstanding borrowing under the secured credit facility after the closing of the acquisitions. Ferrellgas would incur prepayment penalties if it were to repay the notes prior to June 2021.

The scheduled annual principal payments on long-term debt are as follows:



For the year ending July 31,	Scheduled annual principal payments
2018	$	2,578
2019	187,644
2020	358,180
2021	501,055
2022	370
Thereafter	974,978
Total	$	2,024,805

Secured credit facility

During January 2016, Ferrellgas executed a commitment increase supplement to its secured credit facility that increased the size of this facility from $600.0 million to $700.0 million. The commitment increase supplement did not change the interest rate or maturity date of the secured credit facility which remains at October, 2018.

On September 27, 2016, Ferrellgas entered into a fifth amendment to its secured credit facility to modify the maximum consolidated leverage ratio covenant.

On April 28, 2017, Ferrellgas entered into a sixth amendment to its secured credit facility to modify the maximum consolidated leverage ratio covenant and the consolidated interest coverage ratio covenant. The amendment to our secured credit facility also (1) reduces the maximum amount available to be borrowed from $700 million to $575 million, (2) increases the pricing of loans when our leverage ratio is greater than or equal to 6.00x from LIBOR plus 3.50% to LIBOR plus 3.75% and when our leverage ratio is greater than or equal to 7.00x from LIBOR plus 3.50% to LIBOR plus 4.00%, (3) limits the amount of distributions (other than distributions to Ferrellgas Partners for payments of interest payable on its unsecured notes) that the operating partnership may make to Ferrellgas Partners to $10 million per quarter (Ferrellgas Partners' current distribution rate is $9.8 million per quarter) until the leverage ratio is less than 5.50x, (4) reduces the amount of investments we can make when our leverage ratio is greater than 5.50x from $200 million to $50 million, and (5) requires us to reduce our secured credit facility with 50% of the net cash proceeds received from any equity sale.

As of July 31, 2017, Ferrellgas had total borrowings outstanding under its secured credit facility of $245.5 million, of which $185.7 million was classified as long-term debt. Ferrellgas had $190.3 million of capacity under the secured credit facility as of July 31, 2017. However, the consolidated leverage ratio covenant under this facility limits additional borrowings to $67.5 million as of July 31, 2017. As of July 31, 2016, Ferrellgas had total borrowings outstanding under its secured credit facility of $394.4 million, of which $293.1 million was classified as long-term debt.

Borrowings outstanding at July 31, 2017 and 2016 under the secured credit facility had a weighted average interest rate of 6.0% and 3.7%, respectively. All borrowings under the secured credit facility bear interest, at Ferrellgas’ option, at a rate equal to either:


•	for Base Rate Loans or Swing Line Loans, the Base Rate, which is defined as the higher of i) the federal funds rate plus 0.50%, ii) Bank of America’s prime rate; or iii) the Eurodollar Rate plus 1.00%; plus a margin varying from 0.75% to 3.00% (as of July 31, 2017 and 2016, the margin was 2.75% and 1.75%, respectively); or


•	for Eurodollar Rate Loans, the Eurodollar Rate, which is defined as the LIBOR Rate plus a margin varying from 1.75% to 4.00% (as of July 31, 2017 and 2016, the margin was 3.75% and 2.75%, respectively).

As of July 31, 2017, the federal funds rate and Bank of America’s prime rate were 1.07% and 4.25%, respectively. As of July 31, 2016, the federal funds rate and Bank of America’s prime rate were 0.40% and 3.50%, respectively. As of July 31, 2017, the one-month and three-month Eurodollar Rates were 1.23% and 1.31%, respectively. As of July 31, 2016, the one-month and three-month Eurodollar Rates were 0.48% and 0.68%, respectively.

In addition, an annual commitment fee is payable at a per annum rate range from 0.35% to 0.50% times the actual daily amount by which the facility exceeds the sum of (i) the outstanding amount of revolving credit loans and (ii) the outstanding amount of letter of credit obligations.

The obligations under this credit facility are secured by substantially all assets of Ferrellgas, the general partner and certain subsidiaries of Ferrellgas but specifically excluding (a) assets that are subject to Ferrellgas’ accounts receivable securitization facility, (b) the general partner’s equity interest in Ferrellgas Partners and (c) equity interest in certain unrestricted subsidiaries. Such obligations are also guaranteed by the general partner and certain subsidiaries of Ferrellgas.

Letters of credit outstanding at July 31, 2017 totaled $139.2 million and were used to secure commodity hedges and product purchases, and to a lesser extent, insurance arrangements. Letters of credit outstanding at July 31, 2016 totaled $86.3 million and were used primarily to secure insurance arrangements and to a lesser extent, product purchases. At July 31, 2017, Ferrellgas had available letter of credit remaining capacity of $60.8 million. At July 31, 2016, Ferrellgas had available letter of credit remaining capacity of $113.7 million. Ferrellgas incurred commitment fees of $1.1 million, $1.4 million and $1.5 million in fiscal 2017, 2016 and 2015, respectively.

Financial covenants

The indenture governing the outstanding notes of Ferrellgas Partners and the agreements governing the operating partnership’s indebtedness contain various covenants that limit Ferrellgas Partners' ability and the ability of specified subsidiaries to, among other things, make restricted payments and incur additional indebtedness. The general partner believes that the most restrictive of these covenants are the consolidated fixed charge coverage ratio, as defined in the indenture governing the outstanding notes of Ferrellgas Partners, and the consolidated leverage ratio and consolidated interest coverage ratio, as defined in the secured credit facility and the accounts receivable securitization facility.

Before a restricted payment (as defined in the secured credit facility and the operating partnership indentures) can be made by the operating partnership, the operating partnership must be in compliance with the consolidated leverage ratio and consolidated interest coverage ratio covenants under the secured credit facility and accounts receivable securitization facility and in compliance with the covenants under the operating partnerships indentures. If the operating partnership is unable to make restricted payments, Ferrellgas Partners will not have the ability to make semi-annual interest payments on its $357.0 million 8.625% unsecured senior notes due 2020 or distributions to Ferrellgas Partners common unitholders. If Ferrellgas Partners does not make interest payments on its unsecured notes, that would constitute an event of default, which would permit the acceleration of the obligations underlying the indenture, including all outstanding principal owed. The accelerated obligations would become immediately due and payable, which would in turn trigger cross acceleration of other debt. If Ferrellgas' debt obligations are accelerated, Ferrellgas may be unable to borrow sufficient funds to refinance debt in which case unitholders could experience a partial or total loss of their investment.

Before a restricted payment (as defined in the Ferrellgas Partners indenture) can be made by Ferrellgas Partners, Ferrellgas Partners must be in compliance with the consolidated fixed charge coverage ratio covenant under the Ferrellgas Partners indenture. If Ferrellgas Partners is unable to make restricted payments, Ferrellgas Partners will not have the ability to make distributions to Ferrellgas Partners common unitholders.

A breach of the consolidated leverage ratio covenant or the consolidated interest coverage ratio covenant under the secured credit facility and the accounts receivable securitization facility would result in an event of default under those facilities resulting in the operating partnership’s inability to obtain funds under those facilities and would give the lenders and receivables purchasers the right to accelerate the operating partnership's obligations under those facilities and to exercise remedies to collect the outstanding amounts under those facilities.

Consolidated leverage ratio

The consolidated leverage ratio is defined as the ratio of total debt of the operating partnership to trailing four quarters EBITDA (both as adjusted for certain, defined items) of the operating partnership, as detailed in Ferrellgas' secured credit facility.

On April 28, 2017, the maximum consolidated leverage covenant was modified as follows:



	Maximum leverage ratio	Maximum leverage ratio
Date	(prior to sixth amendment)	(after sixth amendment)
July 31, 2017	6.05	7.75
October 31, 2017	5.95	7.75
January 31, 2018	5.95	7.75
April 30, 2018	5.50	7.75
July 31, 2018 & thereafter	5.50	5.50

Ferrellgas' consolidated leverage ratio was 7.46x as of July 31, 2017; the margin allows for approximately $67.5 million of additional borrowing capacity or approximately $8.7 million less EBITDA. This covenant also restricts Ferrellgas' ability to make distribution payments as discussed above.

Consolidated interest coverage ratio

The consolidated interest coverage ratio is defined as the ratio of trailing four quarters EBITDA to interest expense (both as adjusted for certain, specified items) of the operating partnership, as detailed in Ferrellgas' secured credit facility and accounts receivable securitization facility.

On April 28, 2017, the minimum consolidated interest coverage ratio was modified as follows:



	Minimum consolidated interest coverage ratio	Minimum consolidated interest coverage ratio
Date	(prior to sixth amendment)	(after sixth amendment)
July 31, 2017	2.50	1.75
October 31, 2017	2.50	1.75
January 31, 2018	2.50	1.75
April 30, 2018	2.50	1.75
July 31, 2018 & thereafter	2.50	2.50

Ferrellgas' consolidated interest coverage ratio was 1.99x at July 31, 2017; the margin allows for approximately $15.9 million of additional interest expense or approximately $27.8 million less EBITDA.

Consolidated fixed charge coverage ratio

The indenture governing the outstanding notes of Ferrellgas Partners includes a consolidated fixed charge coverage ratio test for the incurrence of debt and the making of restricted payments. This covenant requires that the ratio of trailing four quarters EBITDA to interest expense (both as adjusted for certain, specified items) of Ferrellgas Partners be at least 1.75x before a restricted payment (as defined in the indenture) can be made by Ferrellgas Partners. If this ratio were to drop below 1.75x, these indentures allow us to make restricted payments of up to $50.0 million in total over a 16 quarter period while below this ratio. As of July 31, 2017, the ratio was 1.50x. As a result, the $9.8 million distribution paid to common unitholders on September 14, 2017 was taken from the $50.0 million restricted payment limitation, leaving $40.2 million for future restricted payments. If our consolidated fixed charge coverage ratio does not improve to at least 1.75x and we continue our current quarterly distribution rate of $0.10 per common unit, this covenant will not allow us to make common unit distributions for our quarter ending October 31, 2018 and beyond.

Debt and interest expense reduction strategy

Ferrellgas continues to execute on a strategy to reduce its debt and interest expense. This strategy may include issuance of equity, amending existing debt agreements, asset sales or a further reduction in Ferrellgas Partners' annual distribution, which was reduced during the quarter ended October 31, 2016 from an annualized rate of $2.05 to $0.40 per common unit. Ferrellgas believes any debt and interest expense reduction strategies would remain in effect until Ferrellgas' consolidated leverage ratio reaches 4.5x or a level Ferrellgas deems appropriate for its business.

If Ferrellgas is unsuccessful with its strategy to reduce debt and interest expense, or is unsuccessful in renegotiating its secured credit facility, which matures in October 2018, or is unable to secure alternative liquidity sources, it may not have the liquidity to fund its operations after that maturity date.

Failure to maintain compliance with these and other covenants in our agreements or failure to renew or replace liquidity available under the secured credit facility could have a material effect on Ferrellgas' operating capacity and cash flows and could further restrict Ferrellgas' ability to incur debt, pay interest on the notes or to make cash distributions to unitholders. An inability to pay interest on the notes could result in an event of default that would permit the acceleration of all of Ferrellgas' indebtedness. The accelerated debt would become immediately due and payable, which would in turn trigger cross-acceleration under other debt. If the payment of Ferrellgas' debt is accelerated, Ferrellgas' assets may be insufficient to repay such debt in full and Ferrellgas may be unable to borrow sufficient funds to refinance debt, in which case the unitholders could experience a partial or total loss of their investment.

Further, if Ferrellgas is unsuccessful in renegotiating our secured credit facility prior to the issuance of its first quarter Form 10-Q for the three month period ending October 31, 2017, the entire balance outstanding under the secured credit facility will be considered a current liability and, in the absence of a plan to renew or refinance this debt, that condition may raise substantial doubt about Ferrellgas' ability to continue as a going concern. Either of these events could lead to rating agency downgrades, decreases in trade credit and increased collateral requirements from Ferrellgas' counterparties.

Interest rate swaps

In May 2012, Ferrellgas entered into a $140.0 million interest rate swap agreement to hedge against changes in fair value on a portion of its $500.0 million 6.5% fixed rate senior notes due 2021. Ferrellgas receives 6.5% and pays a one-month LIBOR plus 4.715%, on the $140.0 million swapped. Ferrellgas accounts for this agreement as a fair value hedge.

In May 2012, Ferrellgas entered into a forward interest rate swap agreement to hedge against variability in forecasted interest payments on Ferrellgas’ secured credit facility and collateralized note payable borrowings under the accounts receivable securitization facility. From August 2015 through July 2017, Ferrellgas paid 1.95% and received variable payments based on one-month LIBOR for the notional amount of $175.0 million. From August 2017 through July 2018, Ferrellgas will pay 1.95% and receive variable payments based on one-month LIBOR for the notional amount of $100.0 million. Ferrellgas accounts for this agreement as a cash flow hedge.

Ferrellgas, L.P. [Member]

Debt Disclosure [Text Block]

Debt

Short-term borrowings

Ferrellgas, L.P. classified a portion of its secured credit facility borrowings as short-term because it was used to fund working capital needs that management had intended to pay down within the 12 month period following each balance sheet date. As of July 31, 2017 and 2016, $59.8 million and $101.3 million, respectively, were classified as short-term borrowings. For further discussion see the secured credit facility section below.

Long-term debt

Long-term debt consists of the following:



	2017			2016
Senior notes
Fixed rate, 6.50%, due 2021 (1)	$	500,000		$	500,000
Fixed rate, 6.75%, due 2023 (3)	500,000			500,000
Fixed rate, 6.75%, due 2022, net of unamortized premium of $3,166 and $4,008 at 2017 and 2016, respectively (2)	478,166			479,008
Fair value adjustments related to interest rate swaps	471			5,830

Secured credit facility
Variable interest rate, expiring October 2018 (net of $59.8 million and $101.3 million classified as short-term borrowings at July 31, 2017 and 2016, respectively)	185,719			293,109

Notes payable
12.0% and 11.8% weighted average interest rate at July 31, 2017 and 2016, respectively, due 2018 to 2022, net of unamortized discount of $1,128 and $1,566 at July 31, 2017 and 2016, respectively	5,958			8,484
Total debt, excluding unamortized debt issuance costs	1,670,314			1,786,431
Unamortized debt issuance costs	(18,466		)	(21,629		)
Less: current portion, included in other current liabilities on the consolidated balance sheets	2,578			3,921
Long-term debt	$	1,649,270		$	1,760,881

(1)

During November 2010, Ferrellgas, L.P. issued $500.0 million in aggregate principal amount of new 6.50% senior notes due 2021 at an offering price equal to par. These notes are general unsecured senior obligations of Ferrellgas, L.P. and are effectively junior to all future senior secured indebtedness of Ferrellgas, L.P., to the extent of the value of the assets securing the debt, and are structurally subordinated to all existing and future indebtedness and obligations of Ferrellgas, L.P. The senior notes bear interest from the date of issuance, payable semi-annually in arrears on May 1 and November 1 of each year. The outstanding principal amount is due on May 1, 2021. Ferrellgas, L.P. would incur prepayment penalties if it were to repay the notes prior to May 2019.

(2)

During November 2013, Ferrellgas, L.P. issued $325.0 million in aggregate principal amount of 6.75% senior notes due 2022 at an offering price equal to par. Ferrellgas, L.P. received $319.3 million of net proceeds after deducting underwriters' fees. Ferrellgas, L.P. used the net proceeds to redeem all of its $300.0 million 9.125% fixed rate senior notes due October 1, 2017. Ferrellgas, L.P. used the remaining proceeds to pay the related $14.7 million make whole and consent payments, $3.3 million in interest payments and to reduce outstanding indebtedness under the secured credit facility. During June 2014, Ferrellgas, L.P. issued an additional $150.0 million in aggregate principal amount of 6.75% senior notes due 2022 at an offering price equal to 104% of par. Ferrellgas, L.P. used the net proceeds for general corporate purposes, including to repay indebtedness under its secured credit facility and to pay related transaction fees and expenses. Ferrellgas, L.P. would incur prepayment penalties if it were to repay the notes prior to November 2019.

(3)

During June 2015, Ferrellgas, L.P. issued $500.0 million in aggregate principal amount of 6.75% senior notes due 2023 at an offering price equal to par. The senior notes bear interest from the date of issuance, payable semi-annually in arrears on June 15 and December 15 of each year. The outstanding principal amount is due on June 15, 2023. Ferrellgas, L.P. received $491.3 million of net proceeds after deducting underwriters' fees. Ferrellgas, L.P. used the net proceeds to fund a portion of the cash portion of the consideration for the acquisition of the outstanding membership interests in Bridger Logistics, LLC and its subsidiaries with remaining amounts being used to repay outstanding borrowing under the secured credit facility after the closing of the acquisitions. Ferrellgas, L.P. would incur prepayment penalties if it were to repay the notes prior to June 2021.

The scheduled annual principal payments on long-term debt are as follows:



For the year ending July 31,	Scheduled annual principal payments
2018	$	2,578
2019	187,644
2020	1,180
2021	501,055
2022	370
Thereafter	974,978
Total	$	1,667,805

Secured credit facility

During January 2016, Ferrellgas, L.P. executed a commitment increase supplement to its secured credit facility that increased the size of this facility from $600.0 million to $700.0 million. The commitment increase supplement did not change the interest rate or maturity date of the secured credit facility which remains at October, 2018.

On September 27, 2016, Ferrellgas, L.P. entered into a fifth amendment to its secured credit facility to modify the maximum consolidated leverage ratio covenant.

On April 28, 2017, Ferrellgas, L.P. entered into sixth amendment to its secured credit facility primarily to modify the maximum consolidated leverage ratio covenant and the consolidated interest coverage ratio covenant. The amendment to our secured credit facility also (1) reduces the maximum amount available to be borrowed from $700 million to $575 million, (2) increases the pricing of loans when our leverage ratio is greater than or equal to 6.00x from LIBOR plus 3.50% to LIBOR plus 3.75% and when our leverage ratio is greater than or equal to 7.00x from LIBOR plus 3.50% to LIBOR plus 4.00%, (3) limits the amount of distributions (other than distributions to Ferrellgas Partners for payments of interest payable on its unsecured notes) that the operating partnership may make to Ferrellgas Partners to $10 million per quarter (Ferrellgas Partners' current distribution rate is $9.8 million per quarter) until the leverage ratio is less than 5.50x, (4) reduces the amount of investments we can make when our leverage ratio is greater than 5.50x from $200 million to $50 million, and (5) requires us to reduce our secured credit facility with 50% of the net cash proceeds received from any equity sale.

As of July 31, 2017, Ferrellgas, L.P. had total borrowings outstanding under its secured credit facility of $245.5 million, of which $185.7 million was classified as long-term debt. Ferrellgas, L.P. had $190.3 million of capacity under the secured credit facility as of July 31, 2017. However, the consolidated leverage ratio covenant under this facility limits additional borrowings to $67.5 million as of July 31, 2017. As of July 31, 2016, Ferrellgas, L.P. had total borrowings outstanding under its secured credit facility of $394.4 million, of which $293.1 million was classified as long-term debt.


•	for Base Rate Loans or Swing Line Loans, the Base Rate, which is defined as the higher of i) the federal funds rate plus 0.50%, ii) Bank of America’s prime rate; or iii) the Eurodollar Rate plus 1.00%; plus a margin varying from 0.75% to 3.00% (as of July 31, 2017 and 2016, the margin was 2.75% and 1.75%, respectively); or


•	for Eurodollar Rate Loans, the Eurodollar Rate, which is defined as the LIBOR Rate plus a margin varying from 1.75% to 4.00% (as of July 31, 2017 and 2016, the margin was 3.75% and 2.75%, respectively).

The obligations under this credit facility are secured by substantially all assets of Ferrellgas, L.P., the general partner and certain subsidiaries of Ferrellgas, L.P. but specifically excluding (a) assets that are subject to Ferrellgas, L.P.’s accounts receivable securitization facility, (b) the general partner’s equity interest in Ferrellgas Partners and (c) equity interest in certain unrestricted subsidiaries. Such obligations are also guaranteed by the general partner and certain subsidiaries of Ferrellgas, L.P.

Letters of credit outstanding at July 31, 2017 totaled $139.2 million and were used to secure commodity hedges and product purchases, and to a lesser extent, insurance arrangements. Letters of credit outstanding at July 31, 2016 totaled $86.3 million and were used primarily to secure insurance arrangements and to a lesser extent, product purchases. At July 31, 2017, Ferrellgas, L.P. had available letter of credit remaining capacity of $60.8 million. At July 31, 2016 Ferrellgas, L.P. had available letter of credit remaining capacity of $113.7 million. Ferrellgas, L.P. incurred commitment fees of $1.1 million, $1.4 million and $1.5 million in fiscal 2017, 2016 and 2015, respectively.

Financial covenants

The agreements governing the operating partnership’s indebtedness contain various covenants that limit our ability and the ability of specified subsidiaries to, among other things, make restricted payments and incur additional indebtedness. Our general partner believes that the most restrictive of these covenants are the consolidated leverage ratio and consolidated interest coverage ratio, as defined in our secured credit facility and our accounts receivable securitization facility.

Before a restricted payment (as defined in the secured credit facility and the operating partnership indentures) can be made by the operating partnership, the operating partnership must be in compliance with the consolidated leverage ratio and consolidated interest coverage ratio covenants under the secured credit facility and accounts receivable securitization facility and in compliance with the covenants under the operating partnerships indentures. If the operating partnership is unable to make restricted payments, Ferrellgas Partners will not have the ability to make semi-annual interest payments on its $357.0 million 8.625% unsecured senior notes due 2020 or distributions to Ferrellgas Partners common unitholders. If Ferrellgas Partners does not make interest payments on its unsecured notes, that would constitute an event of default, which would permit the acceleration of the obligations underlying the indenture, including all outstanding principal owed. The accelerated obligations would become immediately due and payable, which would in turn trigger cross acceleration of other debt. If Ferrellgas, L.P.'s debt obligations are accelerated, Ferrellgas, L.P. may be unable to borrow sufficient funds to refinance debt in which case Ferrellgas Partners' unitholders could experience a partial or total loss of their investment.

A breach of the consolidated leverage ratio covenant or the consolidated interest coverage ratio covenant under the secured credit facility and the accounts receivable securitization facility would result in an event of default under those facilities resulting in the operating partnership’s inability to obtain funds under those facilities and would give the lenders and receivables purchasers the right to accelerate the operating partnership’s obligations under those facilities and to exercise remedies to collect the outstanding amounts under those facilities.

Consolidated leverage ratio

The consolidated leverage ratio is defined as the ratio of total debt of the operating partnership to trailing four quarters EBITDA (both as adjusted for certain, specified items) of the operating partnership, as detailed in Ferrellgas, L.P.'s secured credit facility.

On April 28, 2017, the maximum consolidated leverage covenant was modified as follows:



	Maximum leverage ratio	Maximum leverage ratio
Date	(prior to sixth amendment)	(after sixth amendment)
July 31, 2017	6.05	7.75
October 31, 2017	5.95	7.75
January 31, 2018	5.95	7.75
April 30, 2018	5.50	7.75
July 31, 2018 & thereafter	5.50	5.50

Ferrellgas, L.P.'s consolidated leverage ratio was 7.46x as of July 31, 2017; the margin allows for approximately $67.5 million of additional borrowing capacity or approximately $8.7 million less EBITDA. This covenant also restricts Ferrellgas L.P.'s ability to make payments to Ferrellgas Partners for purposes of funding quarterly common unit distributions as discussed above.

Consolidated interest coverage ratio

On April 28, 2017, the minimum consolidated interest coverage ratio was modified as follows:



	Minimum consolidated interest coverage ratio	Minimum consolidated interest coverage ratio
Date	(prior to sixth amendment)	(after sixth amendment)
July 31, 2017	2.50	1.75
October 31, 2017	2.50	1.75
January 31, 2018	2.50	1.75
April 30, 2018	2.50	1.75
July 31, 2018 & thereafter	2.50	2.50

Ferrellgas L.P.'s consolidated interest coverage ratio was 1.99x at July 31, 2017; the margin allows for approximately $15.9 million of additional interest expense or approximately $27.8 million less EBITDA.

Debt and interest expense reduction strategy

Ferrellgas, L.P. continues to execute on a strategy to reduce its debt and interest expense. This strategy may include issuance of Ferrellgas Partners' equity, amending existing debt agreements, asset sales or a further reduction in the operating partnership's funding of Ferrellgas Partners' annual distribution, which was reduced during the quarter ended October 31, 2016 from an annualized rate of $2.05 to $0.40 per common unit. Ferrellgas, L.P. believes any debt and interest expense reduction strategies would remain in effect until Ferrellgas, L.P.'s consolidated leverage ratio reaches 4.5x or a level Ferrellgas, L.P. deems appropriate for its business.

If Ferrellgas, L.P. is unsuccessful with its strategy to reduce debt and interest expense, or is unsuccessful in renegotiating its secured credit facility, which matures in October 2018, or is unable to secure alternative liquidity sources, it may not have the liquidity to fund its operations after that maturity date.

Failure to maintain compliance with these and other covenants in our agreements or failure to renew or replace liquidity available under the secured credit facility could have a material effect on Ferrellgas, L.P.'s operating capacity and cash flows and could further restrict Ferrellgas, L.P.'s ability to incur debt, pay interest on the notes or to make cash distributions to its limited and general partners, which could result in an event of default that would permit the acceleration of all of Ferrellgas, L.P.'s indebtedness. The accelerated debt would become immediately due and payable, which would in turn trigger cross-acceleration under other debt. If the payment of Ferrellgas, L.P.'s debt is accelerated, Ferrellgas, L.P.'s assets may be insufficient to repay such debt in full and Ferrellgas, L.P. may be unable to borrow sufficient funds to refinance debt, in which case the limited and general partners could experience a partial or total loss of their investment.

Further, if Ferrellgas, L.P. is unsuccessful in renegotiating our secured credit facility prior to the issuance of its first quarter Form 10-Q for the three month period ending October 31, 2017, the entire balance outstanding under the secured credit facility will be considered a current liability and, in the absence of a plan to renew or refinance this debt, that condition may raise substantial doubt about Ferrellgas, L.P.'s ability to continue as a going concern. Either of these events could lead to rating agency downgrades, decreases in trade credit and increased collateral requirements from Ferrellgas, L.P.'s counterparties.

Interest rate swaps

In May 2012, Ferrellgas, L.P. entered into a $140.0 million interest rate swap agreement to hedge against changes in fair value on a portion of its $500.0 million 6.5% fixed rate senior notes due 2021. Ferrellgas, L.P. receives 6.5% and pays a one-month LIBOR plus 4.715%, on the $140.0 million swapped. The operating partnership accounts for this agreement as a fair value hedge.

In May 2012, Ferrellgas, L.P. entered into a forward interest rate swap agreement to hedge against variability in forecasted interest payments on Ferrellgas, L.P.’s secured credit facility and collateralized note payable borrowings under the accounts receivable securitization facility. From August 2015 through July 2017, Ferrellgas, L.P. paid 1.95% and received variable payments based on one-month LIBOR for the notional amount of $175.0 million. From August 2017 through July 2018, Ferrellgas, L.P. will pay 1.95% and receive variable payments based on one-month LIBOR for the notional amount of $100.0 million. Ferrellgas, L.P. accounts for this agreement as a cash flow hedge.