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Debt | 3 Months Ended
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Mar. 31, 2017
Debt [Abstract] |
Debt |
11. | Debt
Our short-term debt consisted of a UBS Revolver, defined below, and was $150 million at both March 31, 2017 and December 31, 2016. The average effective interest rates of our UBS Revolver were 4.6% and 3.9% during the three months ended March 31, 2017 and 2016, respectively. UBS Revolver On June 18, 2012, we entered into a global senior secured asset-based syndicated revolving credit facility with UBS AG (“UBS”) with a maturity date of June 18, 2017 (the “UBS Revolver”). Through March 31, 2015, the UBS Revolver provided us with a committed source of capital with a principal borrowing amount of up to $300 million, subject to a borrowing base. On April 1, 2015, in connection with the Alkali Transaction, we entered into an amended and restated asset-based revolving syndicated facility agreement with UBS, which provides for up to $500 million of revolving credit lines, with a $85 million sublimit for letters of credit, with a new maturity that is the earlier of the date which is five years after the closing date and the date which is three months prior to the maturity of the Term Loan, defined below. Availability of revolving credit loans and letters of credit are subject to a borrowing base. Borrowings bear interest at our option, at either a base rate or an adjusted London Interbank Offered Rate (“LIBOR”) as the greatest of (a) the Administrative Agent’s prime rate, (b) the Federal funds effective rate plus 0.50% and (c) the adjusted LIBOR for a one-month period plus 1.00%. The applicable margin ranges from 0.50% to 1.00% for borrowings at the base rate and from 1.50% to 2.00% for borrowings at the adjusted LIBOR, in each case, based on the average daily borrowing availability. On April 1, 2015, we borrowed $150 million against the UBS Revolver, which was outstanding at both March 31, 2017 and December 31, 2016. During each of the three months ended March 31, 2017 and 2016 we had no drawdowns or repayments on the UBS Revolver. At March 31, 2017 and December 31, 2016, our amount available to borrow was $198 million and $190 million, respectively. ABSA Revolving Credit Facility We have a R1.3 billion (approximately $97 million at March 31, 2017) revolving credit facility with ABSA Bank Limited (“ABSA Revolver”) acting through its ABSA Capital Division with a maturity date of June 14, 2017 (the “ABSA”). The ABSA Revolver bears interest at (i) the base rate (defined as one month Johannesburg Interbank Agreed Rate, which is the mid-market rate for deposits in South African Rand, for a period equal to the relevant period which appears on the Reuters Screen SAFEY Page alongside the caption YLD) as of 11h00 Johannesburg time on the first day of the applicable period, plus (ii) the Margin, which is 3.9%. During each of the three months ended March 31, 2017 and 2016, we had no drawdowns or repayments on the ABSA Revolver. At both March 31, 2017 and December 31, 2016, there were no outstanding borrowings on the ABSA Revolver. Long-term debt, net of an unamortized discount and debt issuance costs, consisted of the following:
|  | Original Principal |  |  | Annual Interest Rate |  | Maturity Date |  | March 31, 2017 |  |  | December 31, 2016 |
Term Loan, net of unamortized discount (1) |  | $ | 1,500 |  |  | Variable |  | 3/19/2020 |  | $ | 1,437 |  |  | $ | 1,441 |
Senior Notes due 2020 |  | $ | 900 |  |  |  | 6.375 | % | 8/15/2020 |  |  | 896 |  |  |  | 896 |
Senior Notes due 2022 |  | $ | 600 |  |  |  | 7.50 | % | 3/15/2022 |  |  | 584 |  |  |  | 584 |
Lease financing |  |  |  |  |  |  |  |  |  |  |  | 19 |  |  |  | 19 |
Total borrowings under long-term debt |  |  |  |  |  |  |  |  |  |  |  | 2,936 |  |  |  | 2,940 |
Less: Long-term debt due within one year |  |  |  |  |  |  |  |  |  |  |  | (16 | ) |  |  | (16 | )
Debt issuance costs |  |  |  |  |  |  |  |  |  |  |  | (33 | ) |  |  | (36 | )
Long-term debt |  |  |  |  |  |  |  |  |  |  | $ | 2,887 |  |  | $ | 2,888 |
(1) | Average effective interest rate of 5.0% and 4.9% during the three months ended March 31, 2017 and 2016, respectively.
At March 31, 2017, the scheduled maturities of total borrowings under our long-term debt were as follows:
|  | Total Borrowings |
2017 |  | $ | 12 |
2018 |  |  | 16 |
2019 |  |  | 16 |
2020 |  |  | 2,298 |
2021 |  |  | 1 |
Thereafter |  |  | 597 |
Total |  |  | 2,940 |
Remaining accretion associated with the Term Loan |  |  | (4 | )
Total borrowings under long-term debt |  | $ | 2,936 |
Term Loan On March 19, 2013, we, along with our wholly owned subsidiary, Tronox Pigments (Netherlands) B.V., and certain of our subsidiaries named as guarantors, entered into a Second Amended and Restated Credit and Guaranty Agreement (the “Second Agreement”) with Goldman Sachs Bank USA, as administrative agent and collateral agent, and Goldman Sachs Bank USA, UBS Securities LLC, Credit Suisse Securities (USA) LLC and RBC Capital Markets, as joint lead arrangers, joint bookrunners and co-syndication agents. Pursuant to the Second Agreement, we obtained a $1.5 billion senior secured term loan (the “Term Loan”). The Term Loan was issued net of an original issue discount. At March 31, 2017 and December 31, 2016, the unamortized discount was $4 million and $5 million, respectively. We made principal repayments during the three months ended March 31, 2017 and 2016 of $4 million and $3 million, respectively. On April 23, 2014, we, along with our wholly owned subsidiary, Tronox Pigments (Netherlands) B.V., and certain of our subsidiaries named as guarantors, entered into a Third Amendment to the Credit and Guaranty Agreement (the “Third Agreement”) with the lender parties thereto and Goldman Sachs Bank USA, as administrative agent, which amends the Second Agreement. The Third Agreement provides for the re-pricing of the Term Loan by replacing the existing definition of “Applicable Margin” with a grid pricing matrix dependent upon our public corporate family rating as determined by Moody’s and Standard & Poor’s (with the interest rate under the Third Agreement remaining subject to Eurodollar Rate and Base Rate floors, as defined in the Third Agreement). Pursuant to the Third Agreement, based upon our current public corporate family rating by Moody’s and Standard & Poor’s, the current interest rate per annum is 350 basis points plus LIBOR (subject to a LIBOR floor of 1% per annum) compared to 350 basis points plus LIBOR (subject to a LIBOR floor of 1% per annum) in the Second Agreement. The Third Agreement also amended certain provisions of the Second Agreement to permit us and certain of our subsidiaries to obtain new cash flow revolving credit facilities in place of our existing asset based revolving credit facility. The maturity date under the Second Agreement and all other material terms of the Second Agreement remain the same under the Third Agreement. Debt issuance cost related to the Term Loan of $15 million was recorded as a direct reduction to the carrying value of the long-term debt as described below. Senior Notes due 2020 On August 20, 2012, our wholly owned subsidiary, Tronox Finance LLC (“Tronox Finance”), completed a private placement offering of $900 million aggregate principal amount of senior notes at par value (the “Senior Notes due 2020”). The Senior Notes due 2020 bear interest semiannually at a rate equal to 6.375%, and are fully and unconditionally guaranteed on a senior, unsecured basis by us and certain of our subsidiaries. The Senior Notes due 2020 were initially offered to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and outside the United States to non-U.S. persons pursuant to Regulation S under the Securities Act. Debt issuance costs related to the Senior Notes Due 2020 of $9 million were recorded as a direct reduction to the carrying value of the long-term debt as described below. On September 17, 2013, Tronox Finance issued $900 million in aggregate principal amount of registered 6.375% Senior Notes due 2020 in exchange for its then existing $900 million in aggregate principal amount of its 6.375% Senior Notes due 2020. The Senior Notes due 2020 are guaranteed by Tronox and certain of its subsidiaries. See Note 22. There were no repayments during the three months ended March 31, 2017. During the three months ended March 31, 2016, we repurchased $4 million of face value of notes at a price of 77% of par, resulting in a net gain of approximately $1 million which was included in “Gain on extinguishment of debt” in the unaudited Condensed Consolidated Statements of Operations. Senior Notes due 2022 On March 6, 2015, Evolution Escrow Issuer LLC (“Evolution”), a special purpose limited liability company organized under the laws of Delaware, was formed. Evolution was wholly owned by Stichting Evolution Escrow, a Dutch foundation not affiliated with the Company On March 19, 2015, Evolution closed an offering of $600 million aggregate principal amount of its 7.50% Senior Notes due 2022 (the “Senior Notes due 2022”). The Senior Notes due 2022 were offered and sold by Evolution in reliance on an exemption pursuant to Rule 144A and Regulation S under the Securities Act. The Senior Notes due 2022 were issued under an Indenture, dated as of March 19, 2015 (the “Indenture”), between Evolution and Wilmington Trust, National Association (the “Trustee”). On April 1, 2015, in connection with the Alkali Transaction, Evolution merged with and into Tronox Finance, Tronox Finance assumed the obligations of Evolution under the Indenture and the Senior Notes due 2022, and the proceeds from the offering were released to us to partially pay the purchase price for the Alkali Transaction. We and certain of our subsidiaries entered into a supplemental indenture (the “First Supplemental Indenture”), by and among us, Tronox Finance, the guarantors party thereto, and the Trustee, pursuant to which we and such subsidiaries became guarantors of the Senior Notes due 2022 under the Indenture. The Senior Notes due 2022 have not been registered under the Securities Act, and may not be offered or sold in the U.S. absent registration or an applicable exemption from registration requirements. There were no repayments during the three months ended March 31, 2017. During the three months ended March 31, 2016, we repurchased $16 million of face value of notes at a price of 76% of par, resulting in a net gain of approximately $3 million which was included in “Gain on extinguishment of debt” in the unaudited Condensed Consolidated Statements of Operations. The Indenture and the Senior Notes due 2022 provide, among other things, that the Senior Notes due 2022 are senior unsecured obligations of Tronox Finance. Interest is payable on March 15 and September 15 of each year beginning on September 15, 2015 until their maturity date of March 15, 2022. The terms of the Indenture, among other things, limit, in certain circumstances, the ability of us to: incur certain additional indebtedness and issue preferred stock; make certain dividends, distributions, investments and other restricted payments; sell certain assets; incur liens; agree to any restrictions on the ability of certain subsidiaries to make payments to the Company; consolidate or merge with or into, or sell substantially all of our assets to, another person; enter into transactions with affiliates; and enter into new lines of business. Debt issuance costs related to the Senior Notes due 2022 of $9 million were recorded as a direct reduction of the carrying value of the long-term debt as described below. Liquidity and Capital Resources As of March 31, 2017, we had $198 million available under the $500 million UBS Revolver, $97 million available under the ABSA Revolver and $265 million in cash and cash equivalents. Lease Financing We have capital lease obligations in South Africa, which are payable through 2031 at a weighted average interest rate of approximately 14%. At both March 31, 2017 and December 31, 2016, assets recorded under capital lease obligations were $21 million. Related accumulated amortization was $7 million and $6 million at March 31, 2017 and December 31, 2016, respectively. During each of the three months ended March 31, 2017 and 2016, we made principal payments of less than $1 million. Fair Value Our debt is recorded at historical amounts. At both March 31, 2017 and December 31, 2016, the fair value of the Term Loan was $1.5 billion. At March 31, 2017 and December 31, 2016, the fair value of the Senior Notes due 2020 was $903 million and $841 million, respectively. At March 31, 2017 and December 31, 2016, the fair value of the Senior Notes due 2022 was $605 million and $544 million, respectively. We determined the fair value of the Term Loan, the Senior Notes due 2020 and the Senior Notes due 2022 using quoted market prices. The fair value hierarchy for the Term Loan, the Senior Notes due 2020 and the Senior Notes due 2022 is a Level 1 input. Balances outstanding under our UBS Revolver are carried at contracted amounts, which approximate fair value based on the short term nature of the borrowing and the variable interest rate. The fair value hierarchy for our UBS Revolver is a Level 2 input. Debt Covenants At March 31, 2017, we had financial covenants in the UBS Revolver, the ABSA Revolver and the Term Loan; however, only the ABSA Revolver had a financial maintenance covenant that applies to local operations and only when the ABSA Revolver is drawn upon. The Term Loan and the UBS Revolver are subject to an intercreditor agreement pursuant to which the lenders’ respective rights and interests in the security are set forth. We were in compliance with all our financial covenants as of and for the three months ended March 31, 2017. Interest and Debt Expense, Net Interest and debt expense, net in the unaudited Condensed Consolidated Statements of Operations consisted of the following:
|  | Three Months Ended March 31, |
|  | 2017 |  |  | 2016 |
Interest on debt |  | $ | 43 |  |  | $ | 44 |
Amortization of deferred debt issuance costs and discounts on debt |  |  | 3 |  |  |  | 3 |
Capitalized interest |  |  | (1 | ) |  |  | (1 | )
Other |  |  | 1 |  |  |  | — |
Total interest and debt expense, net |  | $ | 46 |  |  | $ | 46 |
In connection with obtaining debt, we incurred debt issuance costs, which are being amortized through the respective maturity dates using the effective interest method. At March 31, 2017 and December 31, 2016, we had deferred debt issuance costs of $3 million and $4 million, respectively, related to the UBS Revolver and ABSA Revolvers which are recorded in “Other long-term assets” in the unaudited Condensed Consolidated Balance Sheets and $33 million and $36 million at March 31, 2017 and December 31, 2016, respectively, of Term Loan, Senior Notes due 2020 and Senior Notes due 2022, which were recorded as a direct reduction of the carrying value of the long-term debt.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.19,20,22) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 + Details
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