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Debt | 6 Months Ended
--- | ---
Jun. 30, 2018
Debt Disclosure [Abstract] |
Debt | Debt All of our debt is held at the parent, which is reported in the Other segment. The following table summarizes our outstanding debt obligations and their classification in the accompanying consolidated balance sheets:
| June 30, 2018 |  | December 31, 2017
| (In millions)
Current portion of long-term debt: |  |  |
1.125% Convertible Notes, net of unamortized discount | $ | 422 |  |  | $ | 499 |
1.625% Convertible Notes, net of unamortized discount | 63 |  |  | 157 |
Lease financing obligations | 1 |  |  | 1 |
Debt issuance costs | (2 | ) |  | (4 | )
| 484 |  |  | 653 |
Non-current portion of long-term debt: |  |  |
5.375% Notes | 700 |  |  | 700 |
4.875% Notes | 330 |  |  | 330 |
Credit Facility | — |  |  | 300 |
Debt issuance costs | (11 | ) |  | (12 | )
| 1,019 |  |  | 1,318 |
Lease financing obligations | 198 |  |  | 198 |
| $ | 1,701 |  |  | $ | 2,169 |
Interest cost recognized relating to our convertible senior notes for the periods presented was as follows:
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2018 |  | 2017 |  | 2018 |  | 2017
| (In millions)
Contractual interest at coupon rate | $ | 2 |  |  | $ | 3 |  |  | $ | 4 |  |  | $ | 6 |
Amortization of the discount | 6 |  |  | 8 |  |  | 13 |  |  | 16 |
| $ | 8 |  |  | $ | 11 |  |  | $ | 17 |  |  | $ | 22 |
Credit Facility In January 2017, we entered into an amended unsecured $500 million revolving credit facility (Credit Facility). The Credit Facility has a term of five years and all amounts outstanding will be due and payable on January 31, 2022. In May 2018, we repaid all outstanding borrowings under the Credit Facility. As of June 30, 2018, no amounts were outstanding under the Credit Facility, and outstanding letters of credit amounting to $6 million reduced our borrowing capacity under the Credit Facility to $494 million. Borrowings under our Credit Facility bear interest based, at our election, on a base rate or an adjusted London Interbank Offered Rate (LIBOR), plus in each case the applicable margin. In addition to interest payable on the principal amount of indebtedness outstanding from time to time under the Credit Facility, we are required to pay a quarterly commitment fee. The Credit Facility contains customary non-financial and financial covenants, including a net leverage ratio and an interest coverage ratio. As of June 30, 2018, we were in compliance with all financial and non-financial covenants under the Credit Facility and other long-term debt. Bridge Credit Agreement In January 2018, we entered into a bridge credit agreement (Bridge Credit Agreement) with several banks. Under the Bridge Credit Agreement, we may borrow up to $550 million to: (i) satisfy conversions of our 1.125% Convertible Notes; (ii) satisfy and/or refinance indebtedness incurred to satisfy conversion of the 1.125% Convertible Notes; (iii) repay or refinance our Credit Facility; and (iv) pay fees and expenses in connection with the foregoing. Subject to the satisfaction of certain conditions, the remaining amount of any borrowing may be used for general corporate purposes. Borrowings under the Bridge Credit Agreement are reduced by the following:
• | Any future debt and/or equity transactions including term loans, but excluding any Credit Facility drawing (excluding transactions with proceeds used for working capital purposes and acquisition financings up to $300 million); and
• | On August 20, 2018 (the first put date for the 1.625% Convertible Notes), the Bridge Credit Agreement shall permanently be reduced by the greater of $150 million; and the principal amount of the 1.625% Convertible Notes that are exchanged into equity or otherwise defeased on or prior to that date.
The Bridge Credit Agreement matures on January 1, 2019 and, subject to the satisfaction of certain conditions, we may elect to extend twice the initial maturity date by a period of six months each. The amount available for borrowing under the Bridge Credit Agreement at June 30, 2018, was $550 million. Borrowings under the Bridge Credit Agreement bear interest based, at our election, at a base rate or an adjusted LIBOR rate, plus in each case the applicable margin. Our wholly owned subsidiaries that guarantee our obligations under the indenture governing the 4.875% Notes, the 5.375% Notes, and the Credit Facility have jointly and severally guaranteed our obligations under the Bridge Credit Agreement. The Bridge Credit Agreement contains usual and customary (a) affirmative covenants for credit facilities of this type which are substantially similar to those contained in the Credit Facility, (b) negative covenants consistent with those contained in the 4.875% Notes and (c) events of default for credit facilities of this type which are substantially similar to those contained in the 4.875% Notes. 4.875% Notes due 2025 We have outstanding $330 million aggregate principal amount of senior notes (4.875% Notes) due June 15, 2025, unless earlier redeemed. Interest on the 4.875% Notes is payable semiannually in arrears on June 15 and December 15. Guarantees under the 4.875% Notes mirror those of the Credit Facility. See Note 13, “Supplemental Condensed Consolidating Financial Information,” for more information on the guarantors. The 4.875% Notes contain customary non-financial covenants and change of control provisions. The 4.875% Notes contain a limitation on the use of proceeds which required us to deposit a portion of the net proceeds from their issuance into a segregated deposit account. These funds may be used by us as follows:
• | On or prior to August 20, 2018, to:
◦ | Redeem, repurchase, repay, tender for, or acquire for value all or any portion of our 1.625% Convertible Notes, defined and discussed further below, or to satisfy the cash portion of any consideration due upon any conversion of the 1.625% Convertible Notes and/or
◦ | Pay any interest due on all or any portion of the 4.875% Notes.
• | On or after August 20, 2018, to repurchase all or any portion of the 1.625% Convertible Notes that we are obligated to repurchase; and
• | Subsequent to August 20, 2018 (or such earlier date in the event that there are no longer any 1.625% Convertible Notes outstanding), in any other manner not otherwise prohibited in the indenture governing the 4.875% Notes.
The investments that constitute the segregated funds are current assets reported as “Restricted investments” in the accompanying consolidated balance sheets. As a result of the 1.625% Exchange described below, approximately $94 million of such investments were transferred to unrestricted current investments in the first quarter of 2018. As of June 30, 2018, the balance of current restricted investments was $80 million. 5.375% Notes due 2022 We have outstanding $700 million aggregate principal amount of senior notes (5.375% Notes) due November 15, 2022, unless earlier redeemed. Interest on the 5.375% Notes is payable semiannually in arrears on May 15 and November 15. Certain of our wholly owned subsidiaries guarantee our obligations under the 5.375% Notes. Such guarantees mirror those of the Credit Facility. See Note 13, “Supplemental Condensed Consolidating Financial Information,” for more information on the guarantors. The 5.375% Notes contain customary non-financial covenants and change in control provisions. 1.125% Cash Convertible Senior Notes due 2020 In June 2018, we entered into two separate, privately negotiated note purchase agreements with certain holders of our outstanding 1.125% cash convertible senior notes due January 15, 2020 (1.125% Convertible Notes). In these transactions, we repaid $96 million aggregate principal amount of the 1.125% Convertible Notes, plus accrued interest, for an aggregate cash payment of $228 million. The $132 million difference between the principal amount extinguished and our cash payment represents primarily the settlement of the fair value of the 1.125% Convertible Notes’ embedded cash conversion option feature (which is a derivative liability we refer to as the 1.125% Conversion Option). In addition, we recorded a loss on debt extinguishment of $5 million, primarily relating to the acceleration of the debt discount, which is recorded in “Other expenses (income), net” in the accompanying consolidated statements of operations. No common shares were issued in connection with these transactions. Also in June 2018, in connection with the 1.125% Notes purchases, we entered into privately negotiated termination agreements with each of the counterparties to partially terminate the Call Spread Overlay, defined and further discussed in Notes 8, “Derivatives,” and 9, “Stockholders' Equity.” Following the transactions described above, we have outstanding $454 million aggregate principal amount of 1.125% Convertible Notes. Interest is payable semiannually in arrears on January 15 and July 15. The 1.125% Convertible Notes are convertible only into cash, and not into shares of our common stock or any other securities. The initial conversion rate for the 1.125% Convertible Notes is 24.5277 shares of our common stock per $1,000 principal amount, or approximately $40.77 per share of our common stock. Upon conversion, in lieu of receiving shares of our common stock, a holder will receive an amount in cash, per $1,000 principal amount of 1.125% Convertible Notes, equal to the settlement amount, determined in the manner set forth in the indenture. We may not redeem the 1.125% Convertible Notes prior to the maturity date. The stock price trigger for the 1.125% Convertible Notes is $53.00 per share. The 1.125% Convertible Notes met this trigger in the quarter ended June 30, 2018; therefore, they are convertible into cash and are reported in current portion of long-term debt as of June 30, 2018. The 1.125% Conversion Option was separated from the 1.125% Convertible Notes and accounted for separately as a derivative liability, with changes in fair value reported in our consolidated statements of operations until the 1.125% Conversion Option settles or expires. The effective interest rate approximating what we would have incurred had nonconvertible debt with otherwise similar terms been issued is approximately 6%. As of June 30, 2018, the 1.125% Convertible Notes had a remaining amortization period of 1.5 years. The 1.125% Convertible Notes’ if-converted value exceeded their principal amount by approximately $503 million and $406 million as of June 30, 2018 and December 31, 2017, respectively. 1.625% Convertible Senior Notes due 2044 In March 2018, we entered into separate, privately negotiated, synthetic exchange agreements (1.625% Exchange) with certain holders of our outstanding 1.625% convertible senior notes due 2044 (1.625% Convertible Notes). In this transaction, we exchanged $97 million aggregate principal amount and accrued interest for 1.8 million shares of our common stock. We recorded a loss on debt extinguishment, including transaction fees, of $10 million for the transaction, primarily relating to the inducement premium paid to the bondholders, which is recorded in “Other expenses (income), net” in the accompanying consolidated statements of operations. We did not receive any proceeds from the 1.625% Exchange. On July 11, 2018, we announced notice of our election to redeem the remaining $64 million aggregate principal amount of the 1.625% Convertible Notes on August 20, 2018 (the Redemption Date). Pursuant to the terms of the indenture, the 1.625% Convertible Notes will be redeemed for cash equal to 100% of the principal amount plus accrued and unpaid interest to, but excluding the Redemption Date (the Redemption Price). Also pursuant to the indenture, the 1.625% Convertible Notes may be converted until August 17, 2018, at a conversion rate of 17.2157 s hares of our common stock per $1,000 principal amount, or approximately $58.09 per share of our common stock. Upon conversion, we will pay cash for the principal and, if applicable, deliver shares of our common stock to the converting holders in an amount per $1,000 principal amount equal to the settlement amount (as defined in the related indenture). After August 17, 2018, holders will be entitled only to the Redemption Price. Because the 1.625% Convertible Notes are convertible within 12 months, they are reported in current portion of long-term debt as of June 30, 2018. From the issuance date in 2014, the expected life of the 1.625% Convertible Notes has been approximately four years, ending on the first date we may redeem the 1.625% Convertible Notes in August 2018. As of June 30, 2018, the 1.625% Convertible Notes had a remaining amortization period of 0.1 years. The effective interest rate approximating what we would have incurred had nonconvertible debt with otherwise similar terms been issued is approximately 5%. The outstanding 1.625% Convertible Notes’ if-converted value exceeded their principal amount at June 30, 2018 and December 31, 2017 by approximately $39 million and $50 million, respectively. At June 30, 2018 and December 31, 2017, the equity component of the 1.625% Convertible Notes, including the impact of deferred taxes, was $5 million and $12 million, respectively. Cross-Default Provisions The indentures governing the 4.875% Notes, the 5.375% Notes, the 1.125% Convertible Notes and the 1.625% Convertible Notes contain cross-default provisions that are triggered upon default by us or any of our subsidiaries on any indebtedness in excess of the amount specified in the applicable indenture.

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