LONG-TERM DEBT

Our long-term debt consisted of the following (dollars in thousands):



	Interest rate at December 31, 2017	December 31, 2017			December 31, 2016
Senior unsecured notes due 2021	7.500%	$	—		$	300,000
Senior unsecured notes due 2022	5.625%	400,000			400,000
Senior unsecured notes due 2023	5.625%	350,000			350,000
Senior unsecured notes due 2025	6.375%	325,000			—
Senior unsecured notes due 2026	7.250%	300,000			—
SemGroup $1.0 billion corporate revolving credit facility⁽¹⁾
Alternate base rate borrowings	6.000%	—			20,000
Eurodollar borrowings	3.857%	131,000			—
Second Payment⁽²⁾	8.000%	565,868			—
HFOTCO term loan B ⁽³⁾	5.190%	532,125			—
HFOTCO tax exempt notes payable due 2050	2.353%	225,000			—
HFOTCO $75 million revolving credit facility⁽⁴⁾	4.940%	60,000			—
SemMexico revolving credit facility⁽⁵⁾	9.124%	—			—
Capital leases		25			51
Unamortized premium (discount) and debt issuance costs, net		(30,398		)	(19,107		)
Total long-term debt, net		2,858,620			1,050,944
Less: current portion of long-term debt		5,525			26
Noncurrent portion of long-term debt, net		$	2,853,095		$	1,050,918


(1)	SemGroup $1.0 billion corporate revolving credit facility matures on May 15, 2021.


(2)	Second Payment discounted to fair value based on expected timing of payments and an 8% discount rate. See Note 5 for additional information.


(3)	HFOTCO term loan B is due in quarterly installments of $1.4 million, with a final payment due on August 19, 2021.


(4)	HFOTCO $75 million revolving credit facility matures on August 19, 2019.


(5)	SemMexico revolving credit facility has a borrowing capacity of $70 million pesos ($3.6 million USD at the December 31, 2017 exchange rate).

Early extinguishment of senior unsecured notes due 2021

On March 15, 2017, we purchased $290 million of our outstanding $300 million, 7.50% senior unsecured notes due 2021 (the “2021 Notes”) through a tender offer. The purchase price included a premium and interest to the purchase date. On March 17, 2017, a notice of redemption was issued for the remaining $10 million of the 2021 Notes which were not purchased through the tender offer pursuant to the redemption and satisfaction and discharge provisions of the indenture governing the 2021 Notes. These remaining 2021 Notes were redeemed on June 15, 2017, including a redemption premium and accrued unpaid interest to the redemption date. We recorded a loss on early extinguishment of $19.9 million for the above transactions, which included premiums totaling $15.9 million and the write off of $3.6 million of associated unamortized debt issuance costs.

Issuance of senior unsecured notes due 2025 and 2026

On March 15, 2017, we sold $325 million of 6.375% senior unsecured notes due 2025 (the “2025 Notes”). The 2025 Notes were sold at 98.467% of par, a discount of $5.0 million. The discount is reported as a reduction to the face value of the 2025 Notes on our condensed consolidated balance sheets and is being amortized over the life of the 2025 Notes using the interest method.

The net proceeds from the offering of $315.1 million, after the discount and $4.9 million of initial purchasers’ fees and offering expenses, together with cash on hand, were used to purchase and redeem the 2021 Notes.

On September 20, 2017, we sold $300 million of 7.25% senior unsecured notes due 2026 (the “2026 Notes”). The 2026 Notes were sold at 98.453% of par, a discount of $4.6 million. The discount is reported as a reduction to the face value of the 2026 Notes on our condensed consolidated balance sheets and is being amortized over the life of the 2026 Notes using the interest method.

The net proceeds from the offering of $290.3 million, after the discount and $5.1 million of initial purchasers’ fees and offering expenses, were used to repay amounts borrowed under our revolving credit facility.

Senior unsecured notes

Our senior unsecured notes (collectively, the "Notes") are guaranteed by certain of our subsidiaries: Rose Rock Finance Corporation, Rose Rock Midstream Operating, LLC, Rose Rock Midstream Energy GP, LLC, Rose Rock Midstream Crude, L.P., Rose Rock Midstream Field Services, LLC, SemGas, L.P., SemMaterials, L.P., SemGroup Europe Holding, L.L.C., SemOperating G.P., L.L.C., SemMexico, L.L.C., SemDevelopment, L.L.C., Mid-America Midstream Gas Services, L.L.C., SemCrude Pipeline, L.L.C., Wattenberg Holding, LLC and Glass Mountain Holding, LLC (collectively, the "Guarantors"). The guarantees of the Notes are full and unconditional and constitute the joint and several obligations of the Guarantors.

The Notes are governed by indentures, as supplemented, between the Company and its subsidiary Guarantors and Wilmington Trust, N.A., as trustee (the “Indentures”). The Indentures include customary covenants, including limitations on our ability to incur additional indebtedness or issue certain preferred shares; pay dividends and make certain distributions, investments and other restricted payments; create certain liens; sell assets; enter into transactions with affiliates; enter into sale and lease-back transactions; merge, consolidate, sell or otherwise dispose of all or substantially all of our assets; and designate our subsidiaries as unrestricted under the Indentures.

The Indentures include customary events of default, including events of default relating to non-payment of principal and other amounts owing from time to time, failure to provide required reports, failure to comply with agreements in the Indentures, cross payment-defaults to any material indebtedness, bankruptcy and insolvency events, certain unsatisfied judgments, and invalidation or cessation of the subsidiary guarantee of a significant subsidiary. A default would permit holders to declare the Notes and accrued interest due and payable.

The Notes are effectively subordinated in right of payment to any of our, and the Guarantors', existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness and are structurally subordinated to the obligations of any subsidiary that is not a guarantor of the Notes.

The Company may issue additional Notes under the Indentures from time to time, subject to the terms of the Indentures.

Except as described below, the Company may redeem the Notes, in whole or in part, at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest, if redeemed during the twelve-month period beginning with each period as indicated below:



2022 Notes
From and after July 15, 2017		104.219%
From and after July 15, 2018		102.813%
From and after July 15, 2019		101.406%
From and after July 15, 2020		100.000%



2023 Notes
Not redeemable before May 15, 2019
From and after May 15, 2019		102.813%
From and after May 15, 2020		101.406%
From and after May 15, 2021		100.000%



2025 Notes
Not redeemable before March 15, 2020
From and after March 15, 2020		103.188%
From and after March 15, 2021		101.594%
From and after March 15, 2022		100.000%



2026 Notes
Not redeemable before March 15, 2021
From and after March 15, 2021		103.625%
From and after March 15, 2022		101.813%
From and after March 15, 2023		100.000%

Prior to the redemption dates set forth above, the Company may, at its option, on one or more occasions, redeem up to 35% of the sum of the original aggregate principal amount of the Notes at a redemption price equal to the aggregate principal amount thereof plus a premium equal to stated interest rate of the Notes, plus accrued and unpaid interest, with the net cash proceeds of one or more equity offerings of the Company, subject to certain conditions.

Prior to the redemption dates set forth above, the Company may also redeem all or part of the Notes at a price equal to the principal plus a premium equal to the greater of 1% of the principal or the excess of the present value of the first redemption price from the table above plus all required interest payments due through the first redemption date in the table above, computed using a discount rate based on a published United States Treasury Rate plus 50 basis points, over the principal value of such Note.

In the event of a change of control, the Company is required to offer to repurchase the Notes at an amount equal to 101% of the principal plus accrued and unpaid interest.

Registration rights agreements

In connection with the closing of the offerings of the 2025 Notes and 2026 Notes, the Company and the Guarantors entered into registration rights agreements (the “Registration Rights Agreements”). Under the Registration Rights Agreements, the Company and the Guarantors have agreed to file registration statements with the Securities and Exchange Commission so that holders of such Notes can exchange such Notes and the related guarantees for registered notes and guarantees that have substantially identical terms as such Notes and related guarantees, within 365 days after the original issuance. In certain circumstances, the Company and the Guarantors may be required to file shelf registration statements to cover resales of such Notes. These registration statements were declared effective in January 2018.

Pledges and guarantees

Our senior unsecured notes are guaranteed by certain subsidiaries. See Note 24 for additional information.

Our $1.0 billion corporate revolving credit facility is guaranteed by all of SemGroup’s material domestic subsidiaries, with the exception of Maurepas Pipeline LLC and HFOTCO, and secured by a lien on substantially all of the property and assets of SemGroup Corporation and the other loan parties, subject to customary exceptions.

The HFOTCO term loan B, HFOTCO tax exempt notes payable and HFOTCO $75 million revolving credit facility are secured by substantially all of the assets of HFOTCO and its immediate parent, Buffalo Gulf Coast Terminals LLC. The HFOTCO tax exempt notes payable have a priority position over the HFOTCO term loan B and HFOTCO revolving credit facility.

Covenants and restrictions

The SemGroup credit agreement includes customary affirmative and negative covenants, including limitations on the creation of new indebtedness, liens, sale and lease-back transactions, new investments, making fundamental changes including mergers and consolidations, making of dividends and other distributions, making material changes in our business, modifying certain documents and maintenance of a consolidated leverage ratio and an interest coverage ratio. In addition, the credit agreement prohibits any commodity transactions that are not permitted by our Risk Governance Policies.

The terms of the SemGroup credit facility restrict, to some extent, the payment of cash dividends on our common stock. The credit agreement is guaranteed by all of our material domestic subsidiaries, with the exception of HFOTCO, and secured by a lien on substantially all of our property and assets, subject to customary exceptions.

The agreement governing HFOTCO senior secured term loans or senior secured revolver borrowings (the “HFOTCO Credit Agreement”) includes customary representations and warranties and affirmative and negative covenants, which were made only for the purposes of the HFOTCO Credit Agreement and as of the specific date (or dates) set forth therein, and may be subject to certain limitations as agreed upon by the contracting parties, and apply only to Buffalo Gulf Coast Terminals LLC ("BGCT"), HFOTCO and any subsidiaries of HFOTCO party to the HFOTCO Credit Agreement. Such limitations include the creation of new liens, indebtedness, making of certain restricted payments and payments on indebtedness, making certain dispositions, making material changes in business activities, making fundamental changes including liquidations, mergers or consolidations, making certain investments, entering into certain transactions with affiliates, making amendments to material agreements, modifying the fiscal year, dealing with hazardous materials in certain ways, entering into certain hedging arrangements, entering into certain restrictive agreements, and funding or engaging in sanctioned activities.

In addition, the HFOTCO Credit Agreement contains a financial performance covenant as follows (the “HFOTCO Financial Covenant”): if the aggregate revolving exposure exceeds 25% of the HFOTCO Revolving Commitments, the total adjusted net leverage ratio of BGCT and its restricted subsidiaries under the HFOTCO Credit Agreement may not exceed 7.50 to 1.00 as of the last day of any fiscal quarter. The financial performance covenant is solely for the benefit of the lenders holding HFOTCO Revolving Commitments or HFOTCO Revolving Loans.

The indentures covering HFOTCO's tax exempt notes payable due 2050 ("IKE Bonds") are subject to the Continuing Covenant Agreement. The Continuing Covenant Agreement includes customary representations and warranties and affirmative and negative covenants, which were made only for the purposes of the Continuing Covenant Agreement and as of the specific date (or dates) set forth therein, may be subject to certain limitations as agreed upon by the contracting parties, and apply only to BGCT, HFOTCO and any subsidiaries of HFOTCO party to the Continuing Covenant Agreement. Such covenants include limitations on the creation of new liens, indebtedness, making of certain restricted payments and payments on indebtedness, making certain dispositions, making material changes in business activities, making fundamental changes including liquidations, mergers or consolidations, making certain investments, entering into certain transactions with affiliates, making amendments to certain credit or organizational agreements, modifying the fiscal year, creating or dealing with hazardous materials in certain ways, entering into certain hedging arrangements, entering into certain restrictive agreements, funding or engaging in sanctioned activities, taking actions or causing the trustee to take actions that materially adversely affect the rights, interests, remedies or security of the bondholders, taking actions to remove the trustee, making certain amendments to the bond documents, and taking actions or omitting to take actions that adversely impact the tax-exempt status of the IKE Bonds.

In addition, the Continuing Covenant Agreement contains financial performance covenants as follows:


•	the super senior leverage ratio of BGCT and its restricted subsidiaries under the Continuing Covenant Agreement may not exceed 3.50 to 1.00 as of the last day of any fiscal quarter; and


•	the interest coverage ratio of BGCT and its restricted subsidiaries under the Continuing Covenant Agreement may not be less than 2.00 to 1.00 as of the last day of any fiscal quarter.

In addition, the terms of certain HFOTCO related indebtedness restrict its ability to pay dividends and make other contributions to SemGroup. The restricted net assets of HFOTCO were $1.1 billion as of December 31, 2017.

See "senior unsecured notes" section above for discussion of covenants and restrictions related to the Notes.

Letters of credit

We had the following outstanding letters of credit at December 31, 2017 (dollars in thousands):



SemGroup $1.0 billion revolving credit facility	2.50%	$	39,385
Secured bi-lateral⁽¹⁾	1.75%	$	56,525
SemMexico ⁽²⁾	0.28%	$	14,870

(1) Secured bi-lateral letters of credit are external to the SemGroup $1.0 billion revolving credit facility and do not reduce availability for borrowing on the credit facility.

(2) $292.8 million Mexican pesos at the December 31, 2017 exchange rate.

Scheduled principal payments

The following table summarizes the scheduled principal payments as of December 31, 2017 (in thousands):



	Total
For the year ended:
December 31, 2018	$	605,525
December 31, 2019	65,500
December 31, 2020	5,500
December 31, 2021	646,625
December 31, 2022	400,000
Thereafter	1,200,000
Total	$	2,923,150

In the table above, 2018 includes the Second Payment at the amount that would be required to be paid on December 31, 2018. The payment is expected to be made in 2018, but isn't reflected as current on the balance sheet as payment is not contractually required until after December 31, 2018. The amount paid will vary depending upon the timing of the payment.

Fair value

We estimate the fair value of the Notes based on unadjusted, transacted market prices near the measurement date. Our other long-term debts are estimated to be carried at fair value as a result of the recent timing of borrowings or acquisition. We estimate the fair value of our consolidated long-term debt, including current maturities, to be approximately $2.9 billion at December 31, 2017, which is categorized as a Level 3 measurement due to certain unobservable inputs used to estimate the fair value of the Second Payment.