NOTE H – DEBT

The following table summarizes Ashland’s current and long-term debt as of the dates reported in the Condensed Consolidated Balance Sheets.

(In millions)	June 30, 2018			September 30, 2017
4.750% notes, due 2022	$	1,083		$	1,082
Term Loan B, due 2024		594			599
6.875% notes, due 2043		376			376
Revolving Credit Facility		—			173
Term Loan A, due 2022		250			250
Term Loan A, due 2020		120			250
Accounts receivable securitization		71			56
6.50% junior subordinated notes, due 2029		52			51
Medium-term notes, due 2019, interest of 9.4%		5			5
Other (a)		(19	)		(23	)
Total debt		2,532			2,819
Short-term debt (includes current portion of long-term debt)		(82	)		(235	)
Long-term debt (less current portion)	$	2,450		$	2,584

(a)

Other includes $22 million and $25 million of debt issuance cost discounts as of June 30, 2018 and September 30, 2017, respectively.

The scheduled aggregate maturities of long-term debt by year (including the current portion and excluding debt issuance costs) are as follows: $2 million remaining in 2018, $11 million in 2019, $139 million in 2020, $56 million in 2021 and $1,279 million in 2022.

Ashland Financing Activities

Accounts receivable securitization

During March 2018, the termination date of the accounts receivable securitization facility was extended from March 2018 to March 2020. The available funding for qualified receivables under the accounts receivable securitization facility increased from $100 million to $115 million. No other changes to the agreement are expected to have a significant impact to Ashland's results of operations and financial position.

Cash repatriation

During the nine months ended June 30, 2018, Ashland repatriated approximately $470 million in cash that was primarily used to repay existing debt, principally the outstanding balance of the 2017 Revolving Credit Facility (as defined below) and a portion of the Three-Year TLA facility (as defined below).

2017 Credit Agreement

On May 17, 2017, in conjunction with the closing of the Pharmachem acquisition, Ashland entered into a secured credit agreement (the 2017 Credit Agreement) with a group of lenders. The 2017 Credit Agreement provided for (i) a $250 million three-year term loan A facility (the Three-Year TLA Facility), (ii) a $250 million five-year term loan A facility (the Five-Year TLA Facility and together with the Three-Year TLA Facility, the TLA Facilities) and (iii) a $680 million five-year revolving credit facility (including a $125 million letter of credit sublimit) (the 2017 Revolving Credit Facility). Proceeds of borrowings under the TLA Facilities were used solely to finance the acquisition of Pharmachem, while the proceeds of the 2017 Revolving Credit Facility were used to finance, in part, the acquisition of Pharmachem, to refinance the 2015 Senior Credit Agreement and for general corporate purposes. On May 19, 2017, Ashland entered into Amendment No. 1 to the 2017 Credit Agreement, which increased the aggregate commitments under the 2017 Revolving Credit Facility from $680 million to $800 million.

At Ashland’s option, loans issued under the 2017 Credit Agreement bear interest at either LIBOR or an alternate base rate, in each case plus the applicable interest rate margin. Loans bear interest at LIBOR plus 1.75% per annum, in the case of LIBOR borrowings, or at the alternate base rate plus 0.75%, in the alternative, through and including the date of delivery of a quarterly compliance certificate and thereafter the interest rate will fluctuate between LIBOR plus 1.375% per annum and LIBOR plus 2.500% per annum (or between the alternate base rate plus 0.375% per annum and the alternate base rate plus 1.500% per annum), based upon Ashland’s secured facilities ratings or the consolidated net leverage ratio (as defined in the 2017 Credit Agreement) (whichever yields a lower applicable interest rate margin) at such time. In addition, Ashland was required to pay fees of 0.25% per annum on the daily unused amount of the 2017 Revolving Credit Facility through and including the date of delivery of a compliance certificate, and thereafter the fee rate fluctuates between 0.175% and 0.40% per annum, based upon Ashland’s secured facilities rating or the consolidated net leverage ratio (whichever yields a lower applicable rate). The TLA Facilities may be prepaid at any time without premium. The Three-Year TLA Facility will not amortize and will be due on May 17, 2020. The Five-Year TLA Facility will not amortize in each of the first, second and third years and will amortize at a rate of 20% per annum in each of the fourth and fifth years (payable in equal quarterly installments), with the outstanding balance of the Five-Year TLA Facility to be paid on May 17, 2022.

On June 14, 2017, Ashland entered into Amendment No. 2 to the 2017 Credit Agreement, which provided for a new $600 million seven-year senior secured term loan B facility (the 2017 TLB Facility). At Ashland’s option, loans issued under the 2017 TLB Facility bear interest at either (x) LIBOR plus 2.00% per annum or (y) an alternate base rate plus 1.00% per annum. The 2017 TLB Facility may be prepaid at any time. The 2017 TLB Facility amortizes at a rate of 1.00% per annum (payable in equal quarterly installments) with the outstanding balance to be paid on May 17, 2024.

Ashland incurred $15 million of new debt issuance costs in connection with the 2017 Credit Agreement, of which $2 million was recognized immediately during the three and nine months ended June 30, 2017 within the net interest and other financing expense caption of the Statements of Consolidated Comprehensive Income (Loss). The remaining balance is amortized using the effective interest method. Additionally, as a result of the termination of the 2015 Senior Credit Facility, Ashland recognized a $5 million charge for the accelerated amortization of previously capitalized debt issuance costs, which is included in the net interest and other financing expense caption of the Statements of Consolidated Comprehensive Income (Loss).

2018 financing activity related to the 2017 Credit Agreement

On May 22, 2018, Ashland entered into Amendment No. 3 to the 2017 Credit Agreement which provided for the re-pricing of the 2017 TLB facility. Due to this amendment, loans issued under the 2017 TLB facility bear interest at LIBOR plus 1.75% per annum (previously LIBOR plus 2.00% per annum). All other significant terms of the agreement remained unchanged. Ashland incurred $1 million of new debt issuance costs in connection with the re-pricing, which was expensed during the three and nine months ended June 30, 2018 within the net interest and other financing expense caption of the Statements of Consolidated Comprehensive Income (Loss).

During the three months ended June 30, 2018, Ashland primarily utilized cash from repatriations and borrowings from the accounts receivable securitization facility to repay $130 million of the outstanding balance of the Three-Year TLA facility. As a result of these repayments, Ashland recognized accelerated amortization of previously capitalized debt issuance costs of less than $1 million during the three and nine months ended June 30, 2018, which was included in the net interest and other financing expense caption of the Statements of Consolidated Comprehensive Income (Loss).

Redemption of 3.875% notes due 2018

During the third quarter of 2017 in connection with the issuance of the 2017 TLB Facility, Ashland redeemed all of its outstanding 3.875% Senior Notes due 2018 (2018 notes), of which approximately $659 million were outstanding. Proceeds of borrowings under the 2017 TLB Facility, together with cash on hand, were used to pay for the redemption. Ashland recognized a $13 million charge related to premiums paid and accelerated amortization of previously capitalized debt issuance costs, which is included in the net interest and other financing expense caption of the Statements of Consolidated Comprehensive Income for the three and nine months ended June 30, 2017.

6.50% junior subordinated notes due 2029

In December 2016, Hercules LLC (Hercules) (formerly Hercules Incorporated), an indirect wholly-owned subsidiary of Ashland, repurchased, through a cash tender offer (the Tender Offer), $182 million of the aggregate principal par value amount of its 6.50% junior subordinated notes due 2029 (2029 notes) for an aggregate purchase price of $177 million. As a result of the Tender Offer, the carrying value of the 2029 notes was reduced by $90 million and Ashland recognized a $92 million charge related to accelerated accretion of the recorded debt discount (compared to the total par value) and $5 million of a net gain related to the repayment of the debt. The charge and net gain are included in the net interest and other financing expense caption of the Statements of Consolidated Comprehensive Income (Loss) for the nine months ended June 30, 2017.

Open market repurchases of 4.750% notes due 2022 and 3.875% notes due 2018

During the nine months ended June 30, 2017, Ashland executed open market repurchases of its 4.750% notes due 2022 (2022 notes) and its 3.875% notes due 2018 (2018 notes). As a result of these repurchases, the carrying values of the 2022 notes and 2018 notes were reduced by $39 million and $41 million, respectively. Ashland recognized a $3 million charge related to premiums paid in the open market repurchases and accelerated amortization of previously capitalized debt issuance costs, which is included in the net interest and other financing expense caption of the Statements of Consolidated Comprehensive Income (Loss) for the nine months ended June 30, 2017.

Remaining borrowing capacity

The borrowing capacity remaining under the 2017 Revolving Credit Facility was $750 million due to a reduction of $50 million for letters of credit outstanding as of June 30, 2018. Ashland's total borrowing capacity at June 30, 2018 was $794 million, which included $44 million of available capacity from the accounts receivable securitization facility.

Covenants related to current Ashland debt agreements

Ashland's debt contains usual and customary representations, warranties and affirmative and negative covenants, including financial covenants for leverage and interest coverage ratios, limitations on liens, additional subsidiary indebtedness, restrictions on subsidiary distributions, investments, mergers, sale of assets and restricted payments and other customary limitations. As of June 30, 2018, Ashland is in compliance with all debt agreement covenant restrictions.

The maximum consolidated net leverage ratio permitted under Ashland's most recent credit agreement (the 2017 Credit Agreement) is 4.5. At June 30, 2018, Ashland’s calculation of the consolidated net leverage ratio was 3.7.

The minimum required consolidated interest coverage ratio under the 2017 Credit Agreement during its entire duration is 3.0. At June 30, 2018, Ashland’s calculation of the interest coverage ratio was 4.9.