Long-Term Debt

Long-term debt consisted of the following at December 31 (in millions):



	2016							2015
	Principal		Discount and Issue Costs			Carrying Value		Principal		Discount and Issue Costs			Carrying Value
Direct Senior Obligations of AFG:
9-7/8% Senior Notes due June 2019	$	350	$	(1	)	$	349	$	350	$	(1	)	$	349
3.50% Senior Notes due August 2026	300		(3		)	297		—		—			—
6-3/8% Senior Notes due June 2042	230		(7		)	223		230		(7		)	223
5-3/4% Senior Notes due August 2042	125		(4		)	121		125		(4		)	121
Other	3		—			3		3		—			3
	1,008		(15		)	993		708		(12		)	696

Direct Subordinated Obligations of AFG:
6-1/4% Subordinated Debentures due September 2054	150		(5		)	145		150		(5		)	145
6% Subordinated Debentures due November 2055	150		(5		)	145		150		(5		)	145
	300		(10		)	290		300		(10		)	290

Subsidiaries:
National Interstate bank credit facility	—		—			—		12		—			12
	$	1,308	$	(25	)	$	1,283	$	1,020	$	(22	)	$	998

To achieve a desired balance between fixed and variable rate debt, AFG entered into an interest rate swap in June 2015, which effectively converts its 9-7/8% Senior Notes to a floating rate of three-month LIBOR plus 8.099% (9.0624% at December 31, 2016 and 8.6110% at December 31, 2015). The fair value of the interest rate swap (asset of $1 million and $2 million at December 31, 2016 and December 31, 2015, respectively) and the offsetting adjustment to the carrying value of the notes are both included in the carrying value of the 9-7/8% Senior Notes in the table above.

At December 31, 2016, scheduled principal payments on debt for the subsequent five years and thereafter were as follows: 2017 — none; 2018 — none; 2019 — $350 million; 2020 — none; 2021 — none and thereafter — $958 million.

As shown below at December 31 (principal amount, in millions), the majority of AFG’s long-term debt is unsecured obligations of the holding company and its subsidiaries:



	2016		2015
Senior unsecured obligations	$	1,008	$	720
Subordinated unsecured obligations	300		300
	$	1,308	$	1,020

In August 2016, AFG issued $300 million in 3.50% Senior Notes due in 2026 at a price of 99.608%. The net proceeds of the offering were used to fund a portion of the November 10, 2016 acquisition of the noncontrolling interest in NATL (discussed in Note B — “Acquisitions and Sale of Businesses”). At the acquisition date, the $18 million outstanding under NATL’s bank credit facility, including $6 million borrowed in September 2016, was repaid and the credit agreement was terminated.

In June 2016, AFG replaced its existing credit facility with a new five-year, $500 million revolving credit facility which expires in June 2021. Amounts borrowed under this agreement bear interest at rates ranging from 1.00% to 1.875% (currently 1.375%) over LIBOR based on AFG’s credit rating. No amounts were borrowed under this facility at December 31, 2016 or AFG’s previous credit facility at December 31, 2015.

In September 2015, AFG used cash on hand to redeem the $132 million in outstanding AFG 7% Senior Notes due September 2050 at par value. In November 2015, AFG issued $150 million in 6% Subordinated Debentures due in 2055. During 2015, subsidiaries of AFG repaid all of the outstanding notes secured by real estate.

In September 2014, AFG issued $150 million in 6-1/4% Subordinated Debentures due 2054.

Cash interest payments on long-term debt were $75 million in 2016, $75 million in 2015 and $72 million in 2014. In 2016 and 2015, AFG received $3 million and $2 million, respectively, in interest under the interest rate swap discussed above.