12. DEBT AND INTEREST EXPENSE

At December 31, 2016, WGP’s debt consisted of borrowings under the WGP RCF and WES’s 5.375% Senior Notes due 2021 (the “2021 Notes”), 4.000% Senior Notes due 2022 (the “2022 Notes”), 2.600% Senior Notes due 2018 (the “2018 Notes”), 5.450% Senior Notes due 2044 (the “2044 Notes”), 3.950% Senior Notes due 2025 (the “2025 Notes”), and 4.650% Senior Notes due 2026 (the “2026 Notes”).

The following table presents WES and WGP’s outstanding debt as of December 31, 2016 and 2015:



	December 31, 2016						December 31, 2015
thousands	Principal		Carrying Value		Fair Value ⁽¹⁾		Principal		Carrying Value		Fair Value ⁽¹⁾
WGP RCF	$	28,000	$	28,000	$	28,000	$	—	$	—	$	—
2021 Notes	500,000		494,734		536,252		500,000		493,711		513,645
2022 Notes	670,000		668,634		681,723		670,000		668,432		595,744
2018 Notes	350,000		349,188		351,531		350,000		348,706		339,293
2044 Notes	600,000		593,132		615,753		400,000		389,707		321,499
2025 Notes	500,000		490,971		492,499		500,000		490,095		422,285
2026 Notes	500,000		494,802		518,441		—		—		—
WES RCF	—		—		—		300,000		300,000		300,000
Total long-term debt	$	3,148,000	$	3,119,461	$	3,224,199	$	2,720,000	$	2,690,651	$	2,492,466


⁽¹⁾	Fair value is measured using the market approach and Level 2 inputs.

12. DEBT AND INTEREST EXPENSE (CONTINUED)

Debt activity. The following table presents WES and WGP’s debt activity for the years ended December 31, 2016 and 2015:



thousands	Carrying Value
Balance at December 31, 2014	$	2,409,935
WES RCF borrowings	400,000
Issuance of 2025 Notes	500,000
Repayments of WES RCF borrowings	(610,000		)
Repayment of WGP WCF borrowings	(1,150		)
Other	(8,134		)
Balance at December 31, 2015	$	2,690,651
WES RCF borrowings	600,000
Issuance of 2026 Notes	500,000
Issuance of 2044 Notes	200,000
Repayments of WES RCF borrowings	(900,000		)
WGP RCF borrowings	28,000
Other	810
Balance at December 31, 2016	$	3,119,461

WGP RCF. In March 2016, WGP entered into a $250.0 million WGP RCF, which matures in March 2019. The WGP RCF may be used to buy WES common units and for general partnership purposes. The WGP RCF contains an accordion feature whereby WGP can increase the commitments under the WGP RCF up to an aggregate of $500.0 million, subject to receiving increased or new commitments from lenders and the satisfaction of certain other conditions precedent. The WGP RCF contains certain customary affirmative and negative covenants, including the maintenance of a consolidated leverage ratio of not more than 3.50 to 1.00 and limitations on the ability of WGP and WES GP to, among other things, (i) materially alter the character of their business on a consolidated basis from the midstream energy business, (ii) create, assume or suffer to exist liens on their assets, (iii) enter into transactions with affiliates, (iv) make distributions upon the occurrence of certain events of default, (v) create, incur or assume indebtedness, (vi) make dispositions of their assets, (vii) enter into sale and leasebacks and (viii) consolidate with or merge into any other entity or convey, transfer or lease their properties and assets substantially as an entirety to any person or entity.

WGP borrowed $28.0 million under the WGP RCF to fund the purchase of 835,841 WES common units (see Note 2) and to pay fees and expenses associated with entering into the WGP RCF. Pursuant to a collateral agreement with the WGP RCF lenders, WGP’s obligations under the WGP RCF are secured by a first priority lien on all of WGP’s assets (not including the consolidated assets of WES), as well as all present and after acquired equity interests owned by WGP in WES GP and WES. Borrowings under the WGP RCF bear interest, at WGP’s option, at either (a) a base rate equal to the greatest of (i) the Prime Rate, (ii) the Federal Funds Effective Rate plus 0.50% and (iii) LIBOR plus 1.00%, in each case plus applicable margins ranging from 1.00% to 1.75% based upon WGP’s consolidated leverage ratio or (b) LIBOR (with a floor of 0%), plus applicable margins ranging from 2.00% to 2.75% based upon WGP’s consolidated leverage ratio. The unused portion of the WGP RCF is subject to a quarterly commitment fee ranging from 0.30% to 0.50% per annum on the daily unused amount of the WGP RCF based upon WGP’s consolidated leverage ratio. At December 31, 2016, the interest rate and commitment fee rate on the WGP RCF was 2.77% and 0.30%, respectively.

As of December 31, 2016, WGP had $28.0 million of outstanding borrowings ($222.0 million available borrowing capacity) and was in compliance with all covenants under the WGP RCF.

12. DEBT AND INTEREST EXPENSE (CONTINUED)

WGP WCF. WGP is required to reduce all borrowings under the WGP WCF to zero for a period of at least 15 consecutive days during the twelve-month period commencing on November 1 of each year. As of December 31, 2016, WGP had no outstanding borrowings and $30.0 million available for borrowing under the WGP WCF. The interest rate on the WGP WCF, which matures in November 2017, was zero and 1.93% at December 31, 2016 and 2015, respectively.

At December 31, 2016, WGP was in compliance with all covenants under the WGP WCF.

WES Senior Notes. In October 2016, WES issued an additional $200.0 million in aggregate principal amount of 2044 Notes at a price to the public of 102.776% of the face amount plus accrued interest from October 1, 2016 to the settlement date. These notes were offered as additional notes under the indenture governing the 2044 Notes issued in March 2014 and are treated as a single class of securities with the 2044 Notes under such indenture. Including the effects of (i) the issuance premium for the October 2016 offering of the 2044 Notes, (ii) the issuance discount for the March 2014 offering of the 2044 Notes and (iii) the underwriting discounts, the effective interest rate of the 2044 Notes is 5.530%. Proceeds (net of underwriting discount of $1.8 million and debt issuance costs and excluding accrued interest from October 1, 2016 to the settlement date) were used to repay amounts then outstanding under the WES RCF and for general partnership purposes, including capital expenditures.

The 2026 Notes issued in July 2016 were offered at a price to the public of 99.796% of the face amount. Including the effects of the issuance and underwriting discounts, the effective interest rate of the 2026 Notes is 4.787%. Interest is paid semi-annually on January 1 and July 1 of each year. Proceeds (net of underwriting discount of $3.1 million, original issue discount and debt issuance costs) were used to repay a portion of the amount outstanding under the WES RCF.

The 2025 Notes issued in June 2015 were offered at a price to the public of 98.789% of the face amount. Including the effects of the issuance and underwriting discounts, the effective interest rate of the 2025 Notes is 4.205%. Interest is paid semi-annually on June 1 and December 1 of each year. Proceeds (net of underwriting discount of $3.3 million, original issue discount and debt issuance costs) were used to repay a portion of the amount outstanding under the WES RCF.

At December 31, 2016, WES was in compliance with all covenants under the indentures governing its outstanding notes.

WES RCF. The $1.2 billion WES RCF, which is expandable to a maximum of $1.5 billion, and bears interest at LIBOR, plus applicable margins ranging from 0.975% to 1.45%, or an alternate base rate equal to the greatest of (a) the Prime Rate, (b) the Federal Funds Effective Rate plus 0.5%, or (c) LIBOR plus 1%, in each case plus applicable margins currently ranging from zero to 0.45%, based upon WES’s senior unsecured debt rating. In December 2016, the WES RCF was amended to extend the maturity date from February 2019 to February 2020. WES is required to pay a quarterly facility fee currently ranging from 0.15% to 0.30% of the commitment amount (whether used or unused), based upon its senior unsecured debt rating. The facility fee rate was 0.20% at December 31, 2016 and 2015.

As of December 31, 2016, WES had no outstanding WES RCF borrowings and $4.9 million in outstanding letters of credit, resulting in $1.195 billion available for borrowing under the WES RCF. As of December 31, 2016 and 2015, the interest rate on the outstanding WES RCF borrowings was zero and 1.73%, respectively. At December 31, 2016, WES was in compliance with all covenants under the WES RCF.

All of WES’s notes and obligations under the WES RCF are recourse to WES GP. WES GP is indemnified by wholly owned subsidiaries of Anadarko against any claims made against WES GP for WES’s long-term debt and/or borrowings under the WES RCF.

12. DEBT AND INTEREST EXPENSE (CONTINUED)

WES interest rate agreements. In June 2016, WES entered into a U.S. Treasury rate lock agreement to mitigate the risk of rising interest rates on existing variable-rate debt expected to be refinanced during the third quarter of 2016. The rate lock agreement was not designated as a cash flow hedge and was settled in June 2016 upon the offering of the WES 2026 Notes that closed in July 2016. WES realized a loss of $0.2 million at settlement, which is included in Other income (expense), net in the consolidated statements of operations.

Interest expense. The following table summarizes the amounts included in interest expense:



	Year Ended December 31,
thousands	2016			2015			2014
Third parties
Long-term debt	$	122,428		$	102,058		$	81,495
Amortization of debt issuance costs and commitment fees	7,509			5,734			5,103
Capitalized interest	(5,562		)	(8,318		)	(9,832		)
Total interest expense – third parties	124,375			99,474			76,766
Affiliates
WGP WCF	—			2			3
Deferred purchase price obligation – Anadarko ⁽¹⁾	(7,747		)	14,398			—
Total interest expense – affiliates	(7,747		)	14,400			3
Interest expense	$	116,628		$	113,874		$	76,769


⁽¹⁾	See Note 2 for a discussion of the Deferred purchase price obligation - Anadarko.