DEBT

The carrying value of our long-term debt as of December 31, 2017 and 2016 consisted of the following (in millions):



	2017		2016
8.50% Senior notes due 2019	$	251.4	$	480.2
6.875% Senior notes due 2020	477.9		735.9
4.70% Senior notes due 2021	267.1		674.4
3.00% Exchangeable senior notes due 2024	635.7		604.3
4.50% Senior notes due 2024	619.3		618.6
8.00% Senior notes due 2024	337.9		—
5.20% Senior notes due 2025	663.6		662.8
7.20% Debentures due 2027	149.3		149.2
7.875% Senior notes due 2040	376.7		378.3
5.75% Senior notes due 2044	971.8		970.8
Total debt	4,750.7		5,274.5
Less current maturities⁽¹⁾	—		(331.9		)
Total long-term debt	$	4,750.7	$	4,942.6

⁽¹⁾

In January 2017, we completed exchange offers to exchange our outstanding 8.50% senior notes due 2019, 6.875% senior notes due 2020 and 4.70% senior notes due 2021 for 8.00% senior notes due 2024 and cash. As of December 31, 2016, the aggregate amount of principal repurchased with cash, along with associated premiums, was classified as current maturities of long-term debt on our consolidated balance sheet.

Convertible Senior Notes

In December 2016, Ensco Jersey Finance Limited, a wholly-owned subsidiary of Ensco plc, issued $849.5 million aggregate principal amount of unsecured 2024 Convertible Notes in a private offering. The 2024 Convertible Notes are fully and unconditionally guaranteed, on a senior, unsecured basis, by Ensco plc and are exchangeable into cash, our Class A ordinary shares or a combination thereof, at our election. Interest on the 2024 Convertible Notes is payable semiannually on January 31 and July 31 of each year. The 2024 Convertible Notes will mature on January 31, 2024, unless exchanged, redeemed or repurchased in accordance with their terms prior to such date. Holders may exchange their 2024 Convertible Notes at their option any time prior to July 31, 2023 only under certain circumstances set forth in the indenture governing the 2024 Convertible Notes. On or after July 31, 2023, holders may exchange their 2024 Convertible Notes at any time. The exchange rate is 71.3343 shares per $1,000 principal amount of notes, representing an exchange price of $14.02 per share, and is subject to adjustment upon certain events. The 2024 Convertible Notes may not be redeemed by us except in the event of certain tax law changes.

Upon conversion of the 2024 Convertible Notes, holders will receive cash, our Class A ordinary shares or a combination thereof, at our election. Our intent is to settle the principal amount of the 2024 Convertible Notes in cash upon conversion. If the conversion value exceeds the principal amount (i.e., our share price exceeds the exchange price on the date of conversion), we expect to deliver shares equal to our conversion obligation in excess of the principal amount. During each respective reporting period that our average share price exceeds the exchange price, an assumed number of shares required to settle the conversion obligation in excess of the principal amount will be included in the denominator for our computation of diluted EPS using the treasury stock method. See "Note 1 - Description of the Business and Summary of Significant Accounting Policies" for additional information regarding the impact to our EPS.

The 2024 Convertible Notes were separated into their liability and equity components and included in long-term debt and additional paid-in capital on our consolidated balance sheet, respectively. The carrying amount of the liability component was calculated by measuring the estimated fair value of a similar liability that does not include an associated conversion feature. The carrying amount of the equity component representing the conversion feature was determined by deducting the fair value of the liability component from the principal amount of the 2024 Convertible Notes. The difference between the carrying amount of the liability and the principal amount is amortized to interest expense over the term of the 2024 Convertible Notes, together with the coupon interest, resulting in an effective interest rate of approximately 8% per annum. The equity component is not remeasured if we continue to meet certain conditions for equity classification.

The costs related to the issuance of the 2024 Convertible Notes were allocated to the liability and equity components based on their relative fair values. Issuance costs attributable to the liability component are amortized to interest expense over the term of the notes and the issuance costs attributable to the equity component were recorded to additional paid-in capital on our consolidated balance sheet.

As of December 31, 2017 and 2016, the 2024 Convertible Notes consist of the following (in millions):



Liability component:	2017			2016
Principal	$	849.5		$	849.5
Less: Unamortized debt discount and issuance costs	(213.8		)	(245.2		)
Net carrying amount	635.7			604.3
Equity component, net	$	220.0		$	220.0

During the year ended December 31, 2017, we recognized $25.5 million associated with coupon interest and $31.4 million associated with the amortization of debt discount and issuance costs. During the year ended December 31, 2016, we recognized $1.3 million associated with coupon interest and $1.5 million associated the amortization of debt discount and issuance costs.

The indenture governing the 2024 Convertible Notes contains customary events of default, including failure to pay principal or interest on such notes when due, among others. The indenture also contains certain restrictions, including, among others, restrictions on our ability and the ability of our subsidiaries to create or incur secured indebtedness, enter into certain sale/leaseback transactions and enter into certain merger or consolidation transactions.

Senior Notes

On January 26, 2018, we issued $1.0 billion aggregate principal amount of unsecured 7.75% senior notes due 2026 at par. Interest on the 2026 Notes is payable semiannually on February 1 and August 1 of each year commencing August 1, 2018.

During 2017, we exchanged $332.0 million aggregate principal amount of unsecured 8.00% senior notes due 2024 (the “8 % 2024 Notes”) for certain amounts of our outstanding senior notes due 2019, 2020 and 2021. Interest on the 8% 2024 Notes is payable semiannually on January 31 and July 31 of each year.

During 2015, we issued $700.0 million aggregate principal amount of unsecured 5.20% senior notes due 2025 (the “2025 Notes”) at a discount of $2.6 million and $400.0 million aggregate principal amount of unsecured 5.75% senior notes due 2044 (the “New 2044 Notes”) at a discount of $18.7 million in a public offering. Interest on the 2025 Notes is payable semiannually on March 15 and September 15 of each year. Interest on the New 2044 Notes is payable semiannually on April 1 and October 1 of each year.

During 2014, we issued $625.0 million aggregate principal amount of unsecured 4.50% senior notes due 2024 (the "2024 Notes") at a discount of $850,000 and $625.0 million aggregate principal amount of unsecured 5.75% senior notes due 2044 (the "Existing 2044 Notes" and together with the New 2044 Notes, the "2044 Notes") at a discount of $2.8 million. Interest on the 2024 Notes and the Existing 2044 Notes is payable semiannually on April 1 and October 1 of each year. The Existing 2044 Notes and the New 2044 Notes are treated as a single series of debt securities under the indenture governing the notes.

During 2011, we issued $1.5 billion aggregate principal amount of unsecured 4.70% senior notes due 2021 (the “2021 Notes”) at a discount of $29.6 million in a public offering. Interest on the 2021 Notes is payable semiannually on March 15 and September 15 of each year.

Upon consummation of the Pride acquisition during 2011, we assumed outstanding debt comprised of $900.0 million aggregate principal amount of unsecured 6.875% senior notes due 2020, $500.0 million aggregate principal amount of unsecured 8.5% senior notes due 2019 and $300.0 million aggregate principal amount of unsecured 7.875% senior notes due 2040 (collectively, the "Acquired Notes" and together with the 2021 Notes, 8% 2024 Notes, 2024 Notes, 2025 Notes, 2026 Notes and 2044 Notes, the "Senior Notes"). Ensco plc has fully and unconditionally guaranteed the performance of all Pride obligations with respect to the Acquired Notes. See "Note 15 - Guarantee of Registered Securities" for additional information on the guarantee of the Acquired Notes.

We may redeem the 8% 2024 Notes, 2024 Notes, 2025 Notes, 2026 Notes and 2044 Notes in whole at any time, or in part from time to time, prior to maturity. If we elect to redeem the 8% 2024 Notes, 2024 Notes, 2025 Notes and 2026 Notes before the date that is three months prior to the maturity date or the 2044 Notes before the date that is six months prior to the maturity date, we will pay an amount equal to 100% of the principal amount of the notes redeemed plus accrued and unpaid interest and a "make-whole" premium. If we elect to redeem the 8% 2024 Notes, 2024 Notes, 2025 Notes, 2026 Notes or 2044 Notes on or after the aforementioned dates, we will pay an amount equal to 100% of the principal amount of the notes redeemed plus accrued and unpaid interest but we are not required to pay a "make-whole" premium.

We may redeem each series of the 2021 Notes and the Acquired Notes, in whole or in part, at any time at a price equal to 100% of their principal amount, plus accrued and unpaid interest and a "make-whole" premium.

The indentures governing the Senior Notes contain customary events of default, including failure to pay principal or interest on such notes when due, among others. The indentures governing the Senior Notes also contain certain restrictions, including, among others, restrictions on our ability and the ability of our subsidiaries to create or incur secured indebtedness, enter into certain sale/leaseback transactions and enter into certain merger or consolidation transactions.

Debentures Due 2027

During 1997, Ensco International Incorporated issued $150.0 million of unsecured 7.20% Debentures due 2027 (the "Debentures") in a public offering. Interest on the Debentures is payable semiannually on May 15 and November 15 of each year. We may redeem the Debentures, in whole or in part, at any time prior to maturity, at a price equal to 100% of their principal amount, plus accrued and unpaid interest and a "make-whole" premium. The Debentures are not subject to any sinking fund requirements. During 2009, Ensco plc entered into a supplemental indenture to unconditionally guarantee the principal and interest payments on the Debentures. See "Note 15 - Guarantee of Registered Securities" for additional information on the guarantee of the Debentures.

The Debentures and the indenture pursuant to which the Debentures were issued also contain customary events of default, including failure to pay principal or interest on the Debentures when due, among others. The indenture also contains certain restrictions, including, among others, restrictions on our ability and the ability of our subsidiaries to create or incur secured indebtedness, enter into certain sale/leaseback transactions and enter into certain merger or consolidation transactions.

Tender Offers and Open Market Repurchases

During 2017, we repurchased $194.1 million of our outstanding senior notes on the open market for an aggregate purchase price of $204.5 million with cash on hand and recognized an insignificant pre-tax gain, net of discounts, premiums and debt issuance costs.

During 2016, we launched cash tender offers for up to $750.0 million aggregate purchase price of our outstanding debt. We received tenders totaling $860.7 million for an aggregate purchase price of $622.3 million. We used cash on hand to settle the tendered debt. Additionally during 2016, we repurchased on the open market $269.9 million of outstanding debt for an aggregate purchase price of $241.6 million.

Our tender offers and open market repurchases during the two-year period ended December 31, 2017 were as follows (in millions):

Year Ended December 31, 2017



	Aggregate Principal Amount Repurchased		Aggregate Repurchase Price⁽¹⁾
8.50% Senior notes due 2019	$	54.6	$	60.1
6.875% Senior notes due 2020	100.1		105.1
4.70% Senior notes due 2021	39.4		39.3
Total	$	194.1	$	204.5


⁽¹⁾	Excludes accrued interest paid to holders of the repurchased senior notes.

Year Ended December 31, 2016



	Aggregate Principal Amount Repurchased		Aggregate Repurchase Price ⁽¹⁾
8.50% Senior notes due 2019	$	62.0	$	55.7
6.875% Senior notes due 2020	219.2		181.5
4.70% Senior notes due 2021	817.0		609.0
4.50% Senior notes due 2024	1.7		.9
5.20% Senior notes due 2025	30.7		16.8
Total	$	1,130.6	$	863.9


⁽¹⁾	Excludes accrued interest paid to holders of the repurchased senior notes.

Exchange Offers

During 2017, we completed exchange offers to exchange our outstanding 8.50% senior notes due 2019, 6.875% senior notes due 2020 and 4.70% senior notes due 2021 for 8.00% senior notes due 2024 and cash. The exchange offers resulted in the tender of $649.5 million aggregate principal amount of our outstanding notes that were settled and exchanged as follows (in millions):



	Aggregate Principal Amount Repurchased		8% Senior Notes Due 2024 Consideration		Cash Consideration		Total Consideration
8.50% Senior notes due 2019	$	145.8	$	81.6	$	81.7	$	163.3
6.875% Senior notes due 2020	129.8		69.3		69.4		138.7
4.70% Senior notes due 2021	373.9		181.1		181.4		362.5
Total	$	649.5	$	332.0	$	332.5	$	664.5

During the year ended December 31, 2017, we recognized a pre-tax loss on the exchange offers of approximately $6.2 million, consisting of a loss of $3.5 million that includes the write-off of premiums on tendered debt and $2.7 million of transaction costs.

Debt to Equity Exchange

During 2016, we entered into a privately-negotiated exchange agreement whereby we issued 1,822,432 Class A ordinary shares, representing less than one percent of our outstanding shares, in exchange for $24.5 million principal amount of our 2044 Notes, resulting in a pre-tax gain from debt extinguishment of $8.8 million.

2018 Tender Offers and Redemption

Concurrent with the issuance of the 2026 Notes in January 2018, we launched cash tender offers for up to $985.0 million aggregate purchase price on certain series of senior notes issued by us and Pride International LLC, our wholly-owned subsidiary. The tender offers expired February 7, 2018 and we repurchased $182.6 million of the 8.50% senior notes due 2019, $256.6 million of the 6.875% senior notes due 2020 and $156.2 million of the 4.70% senior notes due 2021. We subsequently issued a redemption notice for the remaining outstanding $55.0 million principal amount of the 8.50% senior notes due 2019. The following table sets forth the total principal amounts repurchased as a result of the tender offers and redemption (in millions):



	Aggregate Principal Amount Repurchased		Aggregate Repurchase Price⁽¹⁾
8.50% Senior notes due 2019	$	237.6	$	256.8
6.875% Senior notes due 2020	256.6		277.1
4.70% Senior notes due 2021	156.2		159.3
Total	$	650.4	$	693.2


⁽¹⁾	Excludes accrued interest paid to holders of the repurchased senior notes.

During the first quarter of 2018, we expect to recognize a pre-tax loss from debt extinguishment of approximately $18.2 million related to the tender offers, net of discounts, premiums, debt issuance costs and transaction costs.

Revolving Credit

In October 2017, we amended our revolving credit facility ("Credit Facility") to extend the final maturity date by two years. Previously, our Credit Facility had a borrowing capacity of $2.25 billion through September 2019 that declined to $1.13 billion through September 2020. Subsequent to the amendment, our borrowing capacity is $2.0 billion through September 2019 and declines to $1.3 billion through September 2020 and to $1.2 billion through September 2022. The credit agreement governing our revolving credit facility includes an accordion feature allowing us to increase the commitments expiring in September 2022 up to an aggregate amount not to exceed $1.5 billion.

Advances under the Credit Facility bear interest at Base Rate or LIBOR plus an applicable margin rate, depending on our credit ratings. We are required to pay a quarterly commitment fee on the undrawn portion of the $2.0 billion commitment, which is also based on our credit ratings.

In October 2017, Moody's announced a downgrade of our credit rating from B1 to B2, and Standard & Poor's downgraded our credit rating from BB to B+, which are both ratings below investment grade. Subsequently, in January 2018, Moody's downgraded our senior unsecured bond credit rating from B2 to B3. The Credit Facility amendment and the rating actions resulted in increases to the interest rates applicable to our borrowings and the quarterly commitment fee on the undrawn portion of the $2.0 billion commitment. The applicable margin rates are 3.00% per annum for Base Rate advances and 4.00% per annum for LIBOR advances. The quarterly commitment fee is 0.75% per annum on the undrawn portion of the $2.0 billion commitment.

The Credit Facility requires us to maintain a total debt to total capitalization ratio that is less than or equal to 60% and to provide guarantees from certain of our rig-owning subsidiaries sufficient to meet certain guarantee coverage ratios. The Credit Facility also contains customary restrictive covenants, including, among others, prohibitions on creating, incurring or assuming certain debt and liens (subject to customary exceptions, including a permitted lien basket that permits us to raise secured debt up to the lesser of $750 million or 10% of consolidated tangible net worth (as defined in the Credit Facility)); entering into certain merger arrangements; selling, leasing, transferring or otherwise disposing of all or substantially all of our assets; making a material change in the nature of the business; paying or distributing dividends on our ordinary shares (subject to certain exceptions, including the ability to continue paying a quarterly dividend of $0.01 per share); borrowings, if after giving effect to any such borrowings and the application of the proceeds thereof, the aggregate amount of available cash (as defined in the Credit Facility) would exceed $150 million; and entering into certain transactions with affiliates.

The Credit Facility also includes a covenant restricting our ability to repay indebtedness maturing after September 2022, which is the final maturity date of our Credit Facility. This covenant is subject to certain exceptions that permit us to manage our balance sheet, including the ability to make repayments of indebtedness (i) of acquired companies within 90 days of the completion of the acquisition or (ii) if, after giving effect to such repayments, available cash is greater than $250 million and there are no amounts outstanding under the Credit Facility.

As of December 31, 2017, we were in compliance in all material respects with our covenants under the Credit Facility. We expect to remain in compliance with our Credit Facility covenants during 2017. We had no amounts outstanding under the Credit Facility as of December 31, 2017 and 2016.

Our access to credit and capital markets depends on the credit ratings assigned to our debt. As a result of recent rating actions by these agencies, we no longer maintain an investment-grade status. Our current credit ratings, and any additional actual or anticipated downgrades in our credit ratings, could limit our available options when accessing credit and capital markets, or when restructuring or refinancing our debt. In addition, future financings or refinancings may result in higher borrowing costs and require more restrictive terms and covenants, which may further restrict our operations.

Maturities

The descriptions of our senior notes above reflect the original principal amounts issued, which have subsequently changed as a result of our tenders, repurchases, exchanges and new debt issuances such that the maturities of our debt were as follows (in millions):



Senior Notes	Original Principal		2016 Tenders, Repurchases and Equity Exchange			2017 Exchange Offers			2017 Repurchases			Principal Outstanding at December 31, 2017⁽¹⁾		2018 Tender Offers, Redemption and Debt Issuance			Remaining Principal
8.50% due 2019	$	500.0	$	(62.0	)	$	(145.8	)	$	(54.6	)	$	237.6	$	(237.6	)	$	—
6.875% due 2020	900.0		(219.2		)	(129.8		)	(100.1		)	450.9		(256.6		)	194.3
4.70% due 2021	1,500.0		(817.0		)	(373.9		)	(39.4		)	269.7		(156.2		)	113.5
3.00% due 2024	849.5		—			—			—			849.5		—			849.5
4.50% due 2024	625.0		(1.7		)	—			—			623.3		—			623.3
8.00% due 2024	—		—			332.0			—			332.0		—			332.0
5.20% due 2025	700.0		(30.7		)	—			—			669.3		—			669.3
7.75% due 2026	—		—			—			—			—		1,000.0			1,000.0
7.20% due 2027	150.0		—			—			—			150.0		—			150.0
7.875% due 2040	300.0		—			—			—			300.0		—			300.0
5.75% due 2044	1,025.0		(24.5		)	—			—			1,000.5		—			1,000.5
Total	$	6,549.5	$	(1,155.1	)	$	(317.5	)	$	(194.1	)	$	4,882.8	$	349.6		$	5,232.4


⁽¹⁾	The aggregate principal amount outstanding as of December 31, 2017 excludes net unamortized discounts and debt issuance costs of $132.1 million.

Interest Expense

Interest expense totaled $224.2 million, $228.8 million and $216.3 million for the years ended December 31, 2017, 2016 and 2015, respectively, which was net of interest amounts capitalized of $72.5 million, $45.7 million and $87.4 million in connection with newbuild rig construction and other capital projects.