Debt and Credit Facilities

The following table provides maturity dates or ranges, year-to-date weighted average interest rates and amounts outstanding for our various debt securities and facilities for the periods presented. We fully and unconditionally guarantee all debt issued by Southern Company Gas Capital (whose name was changed from AGL Capital Corporation effective July 19, 2016) and the gas facility revenue bonds issued by Pivotal Utility. Substantially all of Nicor Gas' properties are subject to the lien of the indenture securing its first mortgage bonds. For additional information on our debt and credit facilities, see Note 9 to our consolidated financial statements and related notes included in Item 8 of our 2015 Form 10-K.



		June 30, 2016								June 30, 2015
Dollars in millions	Year(s) due	Weighted average interest rate ⁽¹⁾		Outstanding			December 31, 2015			Weighted average interest rate ⁽¹⁾		Outstanding
Short-term debt
Commercial paper - Southern Company Gas Capital ⁽²⁾	2016	0.8	%	$	20		$	471		0.5	%	$	269
Commercial paper - Nicor Gas ⁽²⁾	2016	0.6		94			539			0.4		190
Total short-term debt		0.7	%	$	114		$	1,010		0.4	%	$	459
Current portion of long-term debt ⁽³⁾	2016	4.6	%	$	575		$	545		4.6	%	$	125
Long-term debt - excluding current portion
Senior notes	2019-2043	4.9	%	$	2,650		$	2,455		5.0	%	$	2,625
First mortgage bonds	2019-2038	5.8		625			375			5.9		375
Gas facility revenue bonds	2022-2033	1.1		200			200			0.9		200
Medium-term notes	2017-2027	7.8		181			181			7.8		181
Total principal long-term debt		4.9	%	$	3,656		$	3,211		4.9	%	$	3,381
Unamortized fair value adjustment	n/a	n/a		$	63		$	68		n/a		$	74
Unamortized debt premium, net	n/a	n/a		14			16			n/a		16
Unamortized debt issuance costs	n/a	n/a		(24		)	(20		)	n/a		(19		)
Total non-principal long-term debt	n/a	n/a		$	53		$	64		n/a		$	71
Total long-term debt - excluding current portion		n/a		$	3,709		$	3,275		n/a		$	3,452
Total debt		n/a		$	4,398		$	4,830		n/a		$	4,036


(1)	Interest rates are calculated based on the daily weighted average balance outstanding for the six months ended June 30, 2016 and 2015.


(2)	As of June 30, 2016, the effective interest rates on our commercial paper were 0.7% for Southern Company Gas Capital and 0.5% for Nicor Gas.


(3)	Balance as of June 30, 2016 includes $275 million of senior notes subject to potential prepayment in August 2016 due to a change of control provision.

Commercial Paper Programs

We maintain commercial paper programs at Southern Company Gas Capital and at Nicor Gas that consist of short-term, unsecured promissory notes, which are used in conjunction with cash from operations to fund our seasonal working capital requirements. Working capital needs fluctuate during the year and are highest during the injection period in advance of the Heating Season. Nicor Gas’ commercial paper program supports working capital needs at Nicor Gas, while all of our other subsidiaries and SouthStar participate in Southern Company Gas Capital’s commercial paper program. During the first six months of 2016, our commercial paper maturities ranged from 1 to 59 days, and at June 30, 2016, the remaining term to maturity was 1 day. During the first six months of 2016, there were no commercial paper issuances with original maturities over three months.

Long-Term Debt

On February 1, 2016 and May 15, 2016, $75 million and $50 million, respectively, of Nicor Gas' first mortgage bonds matured and were repaid using the proceeds from commercial paper borrowings. On June 23, 2016, Nicor Gas issued $250 million aggregate principal amount of first mortgage bonds with the following terms: $100 million at 2.66% due June 20, 2026, $100 million at 2.91% due June 20, 2031 and $50 million at 3.27% due June 20, 2036. The net proceeds were used to repay short-term indebtedness incurred under the Nicor Gas commercial paper program and for other working capital needs.

On May 18, 2016, Southern Company Gas Capital issued $350 million aggregate principal amount of 3.250% senior notes due June 15, 2026, which are guaranteed by Southern Company Gas. A portion of the net proceeds was used to repay $300 million aggregate principal amount of 6.375% senior notes that matured on July 15, 2016, and the remaining net proceeds were used for general corporate purposes.

On January 23, 2015, we executed $800 million in notional value of 10-year and 30-year fixed-rate forward-starting interest rate swaps to hedge potential interest rate volatility prior to our issuances of long-term debt in the fourth quarter of 2015 and in the first six months of 2016 as well as our anticipated issuance later in 2016. We designated the forward-starting interest rate swaps, which are settled on the respective debt issuance dates, as cash flow hedges. In conjunction with the aforementioned debt issuances, we settled $200 million of these interest rate swaps in November 2015 for an immaterial loss and an additional $400 million of these interest rate swaps upon pricing the first mortgage bonds in May 2016 and realized a loss of $26 million that was recognized in accumulated other comprehensive income. We performed a qualitative assessment of effectiveness on the remaining $200 million of interest rate swaps as of June 30, 2016 and concluded that the remaining hedges are highly effective.

Financial and Non-Financial Covenants

The Southern Company Gas Credit Facility and the Nicor Gas Credit Facility each include a financial covenant that requires us to maintain a ratio of total debt to total capitalization of no more than 70% at the end of any month. The following table contains our debt-to-capitalization ratios for the dates presented, which are below the maximum allowed.



	Southern Company Gas						Nicor Gas
	June 30, 2016		December 31, 2015		June 30, 2015		June 30, 2016		December 31, 2015		June 30, 2015
Debt covenants ⁽¹⁾	52	%	54	%	49	%	45	%	56	%	49	%


(1)	As defined in our credit facilities, these ratios include standby letters of credit and performance/surety bonds and exclude accumulated OCI items related to non-cash pension adjustments, welfare benefits liability adjustments and accounting for cash flow hedges.

The credit facilities contain certain non-financial covenants that, among other things, restrict liens and encumbrances, loans and investments, acquisitions, dividends and other restricted payments, asset dispositions, mergers and consolidations, and other matters customarily restricted in such agreements.

Default Provisions

Our credit facilities and other financial obligations include provisions that, if not complied with, could require early payment or similar actions. The most important default events include the following:


•	a maximum leverage ratio;


•	insolvency events and/or nonpayment of scheduled principal or interest payments;


•	acceleration of other financial obligations; and


•	change of control provisions.

We have no triggering events in our debt instruments that are tied to changes in our specified credit ratings or our stock price and have not entered into any transaction that requires us to issue equity based on credit ratings or other triggering events. We were in compliance with all existing debt provisions and covenants, both financial and non-financial, for all periods presented.