DEBT

The following amounts were outstanding at December 31, 2015 and 2014:



(Amounts in thousands)	2015		2014
ITC Holdings 5.875% Senior Notes, due September 30, 2016 (net of discount of $3 and $6, respectively) (a) (b)	$	139,341	$	139,338
ITC Holdings 6.23% Senior Notes, Series B, due September 20, 2017	50,000		50,000
ITC Holdings 6.375% Senior Notes, due September 30, 2036 (net of discount of $159 and $166, respectively) (a)	200,181		200,174
ITC Holdings 6.05% Senior Notes, due January 31, 2018 (net of discount of $329 and $487, respectively)	384,671		384,513
ITC Holdings 5.50% Senior Notes, due January 15, 2020 (net of discount of $521 and $654, respectively)	199,479		199,346
ITC Holdings 4.05% Senior Notes, due July 1, 2023 (net of discount of $534 and $606, respectively)	249,466		249,394
ITC Holdings 3.65% Senior Notes, due June 15, 2024 (net of discount of $1,124 and $1,258, respectively)	398,876		398,742
ITC Holdings 5.30% Senior Notes, due July 1, 2043 (net of discount of $737 and $763, respectively)	299,263		299,237
ITC Holdings Term Loan Credit Agreement, due September 30, 2016 (b)	161,000		161,000
ITC Holdings Revolving Credit Agreement, due March 28, 2019	137,700		53,500
ITC Holdings Commercial Paper Program (net of discount of $10) (b)	94,990		—
ITCTransmission 6.125% First Mortgage Bonds, Series C, due March 31, 2036 (net of discount of $74 and $79, respectively)	99,926		99,921
ITCTransmission 5.75% First Mortgage Bonds, Series D, due April 1, 2018 (net of discount of $26 and $37, respectively)	99,974		99,963
ITCTransmission 4.625% First Mortgage Bonds, Series E, due August 15, 2043 (net of discount of $422 and $437, respectively)	284,578		284,563
ITCTransmission 4.27% First Mortgage Bonds, Series F, due June 10, 2044	100,000		100,000
ITCTransmission Revolving Credit Agreement, due March 28, 2019	48,300		14,300
METC 5.75% Senior Secured Notes, due December 10, 2015 (b)	—		175,000
METC 5.64% Senior Secured Notes, due May 6, 2040	50,000		50,000
METC 3.98% Senior Secured Notes, due October 26, 2042	75,000		75,000
METC 4.19% Senior Secured Notes, due December 15, 2044	150,000		150,000
METC Term Loan Credit Agreement, due December 7, 2018	200,000		—
METC Revolving Credit Agreement, due March 28, 2019	2,500		—
ITC Midwest 6.15% First Mortgage Bonds, Series A, due January 31, 2038 (net of discount of $388 and $405, respectively)	174,612		174,595
ITC Midwest 7.12% First Mortgage Bonds, Series B, due December 22, 2017	40,000		40,000
ITC Midwest 7.27% First Mortgage Bonds, Series C, due December 22, 2020	35,000		35,000
ITC Midwest 4.60% First Mortgage Bonds, Series D, due December 17, 2024	75,000		75,000
ITC Midwest 3.50% First Mortgage Bonds, Series E, due January 19, 2027	100,000		100,000
ITC Midwest 4.09% First Mortgage Bonds, Series F, due April 30, 2043	100,000		100,000
ITC Midwest 3.83% First Mortgage Bonds, Series G, due April 7, 2055	225,000		—
ITC Midwest Revolving Credit Agreement, due March 28, 2019	72,300		191,200
ITC Great Plains 4.16% First Mortgage Bonds, Series A, due November 26, 2044	150,000		150,000
ITC Great Plains Revolving Credit Agreement, due March 28, 2019	59,100		53,800
Total debt	$	4,456,257	$	4,103,586

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(a)	The debt obligations were partially retired prior to maturity date through the cash tender offer described below.


(b)	As of December 31, 2015 and 2014, there was $395.3 million and $175.0 million, respectively, of debt included within debt maturing within one year that is classified as a current liability in the consolidated statements of financial position.

The annual maturities of debt as of December 31, 2015 are as follows:



(In thousands)
2016	$	395,344
2017	90,000
2018	685,000
2019	319,900
2020	235,000
2021 and thereafter	2,735,340
Total	$	4,460,584

ITC Holdings

Commercial Paper Program

On June 8, 2015, ITC Holdings established an ongoing commercial paper program for the issuance and sale of unsecured commercial paper in an aggregate amount not to exceed $400.0 million outstanding at any one time. As of December 31, 2015, ITC Holdings had approximately $95.0 million of commercial paper issued and outstanding under the program, with a weighted-average interest rate of 0.8% and weighted average remaining days to maturity of 6 days. The proceeds from the issuances under the program were used for general corporate purposes, including the repayment of borrowings under ITC Holdings’ revolving credit agreement. The amount outstanding as of December 31, 2015 was classified as debt maturing within one year in the consolidated statements of financial position.

Cash Tender Offer

In May 2014, ITC Holdings commenced a cash tender offer for any and all of the outstanding $255.0 million ITC Holdings 5.875% Senior Notes due September 30, 2016 and $255.0 million ITC Holdings 6.375% Senior Notes due September 30, 2036, under which $115.6 million of the 5.875% Senior Notes and $54.7 million of the 6.375% Senior Notes were validly tendered on May 30, 2014. All of the Senior Notes validly tendered were subsequently retired with the proceeds from the $400.0 million 3.65% Senior Notes described below. ITC Holdings incurred a loss on extinguishment of debt of $29.2 million related to the tender premium, the write-off of deferred debt issuance costs and other related expenses.

Senior Unsecured Notes

On June 4, 2014, ITC Holdings issued $400.0 million aggregate principal amount of 3.65% Senior Notes, due June 15, 2024. The proceeds from the issuance were used for the cash tender offer described above and for general corporate purposes, primarily the repayment of borrowings under the ITC Holdings revolving credit agreement. These ITC Holdings Senior Notes were issued under its 2013 indenture. All issuances of ITC Holdings Senior Notes are unsecured.

ITCTransmission

On June 10, 2014, ITCTransmission issued $75.0 million of the total face amount of $100.0 million of 4.27% First Mortgage Bonds, Series F, due June 10, 2044 (“First Mortgage Bonds, Series F”). ITCTransmission issued the remaining $25.0 million of First Mortgage Bonds, Series F on August 22, 2014. The proceeds from both issuances were used for general corporate purposes, primarily the repayment of borrowings under the ITCTransmission revolving credit agreement. ITCTransmission’s First Mortgage Bonds are issued under its first mortgage and deed of trust and secured by a first mortgage lien on substantially all of its property.

METC

Term Loan Credit Agreements

On December 8, 2015, METC entered into an unsecured, unguaranteed term loan credit agreement due December 7, 2018, under which METC borrowed the maximum of $200.0 million available under the agreement. The proceeds were used to repay the $175.0 million of 5.75% Senior Secured Notes, due December 10, 2015, and for general corporate purposes. The weighted-average interest rate on the borrowing outstanding under this agreement was 1.3% at December 31, 2015.

On January 31, 2014, METC entered into an unsecured, unguaranteed term loan credit agreement, due February 2, 2015, under which METC borrowed the maximum of $50.0 million available under the agreement. The proceeds were used for general corporate purposes, primarily the repayment of borrowings under the METC revolving credit agreement. This borrowing was repaid in full in the fourth quarter of 2014.

Senior Secured Notes

On December 17, 2014, METC issued $150.0 million of 4.19% Senior Secured Notes, due December 15, 2044. The proceeds were used to repay the $50.0 million of 6.63% Senior Secured Notes, due December 18, 2014, and the $50.0 million borrowed under METC’s term loan credit agreement described above and for general corporate purposes, including the repayment of borrowings under METC’s revolving credit agreement. The METC Senior Secured Notes are issued under its first mortgage indenture and secured by a first mortgage lien on substantially all of its real property and tangible personal property.

ITC Midwest

On April 7, 2015, ITC Midwest issued $225.0 million aggregate principal amount of 3.83% First Mortgage Bonds, Series G, due April 7, 2055. The proceeds from the issuance were used for general corporate purposes, including the repayment of borrowings under ITC Midwest’s revolving credit agreement. ITC Midwest’s First Mortgage Bonds are issued under its first mortgage and deed of trust and secured by a first mortgage lien on substantially all of its property.

ITC Great Plains

First Mortgage Bonds

On November 26, 2014, ITC Great Plains issued $150.0 million of 4.16% First Mortgage Bonds, Series A, due November 26, 2044. The proceeds were used to repay the $100.0 million borrowed under a term loan credit agreement entered into by ITC Great Plains and for general corporate purposes, including the repayment of borrowings under the ITC Great Plains’ revolving credit agreement. ITC Great Plains’ First Mortgage Bonds are issued under its first mortgage and deed of trust and secured by a first mortgage lien on substantially all of its property.

Derivative Instruments and Hedging Activities

We may use derivative financial instruments, including interest rate swap contracts, to manage our exposure to fluctuations in interest rates. The use of these financial instruments mitigates exposure to these risks and the variability of our operating results. We are not a party to leveraged derivatives and do not enter into derivative financial instruments for trading or speculative purposes. The interest rate swaps listed below manage interest rate risk associated with the forecasted future issuance of fixed-rate debt related to the expected refinancing of the maturing ITC Holdings 5.875% Senior Notes, due September 30, 2016 (“5.875% Senior Notes”). As of December 31, 2015, ITC Holdings had $139.3 million outstanding under the 5.875% Senior Notes.



Interest Rate Swaps	Notional Amount		Fixed Rate		Original Term	Effective Date
(Amounts in millions)
August 2014 swap	$	25.0	3.217	%	10 years	September 2016
October 2014 swap	25.0		3.075	%	10 years	September 2016
January 2015 swap	25.0		2.301	%	10 years	September 2016
Total	$	75.0

The 10-year term interest rate swaps call for ITC Holdings to receive interest quarterly at a variable rate equal to LIBOR and pay interest semi-annually at various fixed rates effective for the 10-year period beginning September 30, 2016 after the agreements have been terminated. The agreements include a mandatory early termination provision and will be terminated no later than the effective date of the interest rate swaps of September 30, 2016. The interest rate swaps have been determined to be highly effective at offsetting changes in the fair value of the forecasted interest cash flows associated with the expected debt issuance, resulting from changes in benchmark interest rates from the trade date of the interest rate swaps to the issuance date of the debt obligation. ITC Holdings entered into two additional 10-year interest rate swap contracts in February 2016 with notional amounts of $25.0 million each and fixed rates of 1.770% and 1.619%. These additional interest rate swaps also manage interest rate risk associated with the expected refinancing of the 5.875% Senior Notes and have terms comparable to the interest rate swaps described above.

As of December 31, 2015, there has been no material ineffectiveness recorded in the consolidated statement of operations. The interest rate swaps qualify for hedge accounting treatment, whereby any gain or loss recognized from the trade date to the effective date for the effective portion of the hedge is recorded net of tax in accumulated other comprehensive income (“AOCI”). This amount will be accumulated and amortized as a component of interest expense over the life of the related forecasted debt issuance. As of December 31, 2015, the fair value of the derivative instruments was an asset of $0.1 million recorded to other current assets and a liability of $3.5 million recorded to other current liabilities. None of the interest rate swaps contain credit-risk-related contingent features. Refer to Note 12 for additional fair value information.

Revolving Credit Agreements

At December 31, 2015, ITC Holdings and its Regulated Operating Subsidiaries had the following unsecured revolving credit facilities available:



(Amounts in millions)	Total Available Capacity		Outstanding Balance (a)		Unused Capacity			Weighted Average Interest Rate on Outstanding Balance		Commitment Fee Rate (b)
ITC Holdings	$	400.0	$	137.7	$	262.3	(c)	1.6%	(d)	0.175	%
ITCTransmission	100.0		48.3		51.7			1.4%	(e)	0.10	%
METC	100.0		2.5		97.5			1.4%	(e)	0.10	%
ITC Midwest	250.0		72.3		177.7			1.4%	(e)	0.10	%
ITC Great Plains	150.0		59.1		90.9			1.4%	(e)	0.10	%
Total	$	1,000.0	$	319.9	$	680.1

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(a)	Included within long-term debt.


(b)	Calculation based on the average daily unused commitments, subject to adjustment based on the borrower’s credit rating.

(c)

ITC Holdings’ revolving credit agreement may be used for general corporate purposes, including to repay commercial paper issued pursuant to the commercial paper program described above, if necessary. While outstanding commercial paper does not reduce available capacity under ITC Holdings’ revolving credit agreement, the unused capacity under this agreement adjusted for the commercial paper outstanding was $167.3 million as of December 31, 2015.


(d)	Loan bears interest at a rate equal to LIBOR plus an applicable margin of 1.25% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1.00% above the one month LIBOR, plus an applicable margin of 0.25%, subject to adjustments based on ITC Holdings’ credit rating.


(e)	Loans bear interest at a rate equal to LIBOR plus an applicable margin of 1.00% or at a base rate, which is defined as the higher of the prime rate, 0.50% above the federal funds rate or 1.00% above the one month LIBOR, subject to adjustments based on the borrower’s credit rating.

Covenants

Our debt instruments contain numerous financial and operating covenants that place significant restrictions on certain transactions, such as incurring additional indebtedness, engaging in sale and lease-back transactions, creating liens or other encumbrances, entering into mergers, consolidations, liquidations or dissolutions, creating or acquiring subsidiaries, selling or otherwise disposing of all or substantially all of our assets and paying dividends. In addition, the covenants require us to meet certain financial ratios, such as maintaining certain debt to capitalization ratios and maintaining certain interest coverage ratios. As of December 31, 2015, we were not in violation of any debt covenant.