Debt

6 Months Ended

Jun. 30, 2023

Debt Disclosure [Abstract]

Debt

Note 8. Debt

Debt consisted of the following:

	As of			As of
	June 30,			December 31,
	2023			2022
Credit Agreement	$	1,933		$	2,227
Notes:
4.000% Senior Secured Notes due 2027		1,000			1,000
4.375% Senior Secured Notes due 2028		500			500
Pactiv Debentures:
7.950% Debentures due 2025		217			217
8.375% Debentures due 2027		167			167
Other		45			49
Total principal amount of borrowings		3,862			4,160
Deferred debt issuance costs (“DIC”)		(13	)		(14	)
Original issue discounts, net of premiums (“OID”)		(9	)		(10	)
		3,840			4,136
Less: current portion		(18	)		(31	)
Long-term debt	$	3,822		$	4,105

We were in compliance with all debt covenants during the six months ended June 30, 2023 and the year ended December 31, 2022.

Credit Agreement

PTVE and certain of its U.S. subsidiaries are parties to a senior secured credit agreement dated August 5, 2016 as amended (the “Credit Agreement”). As of June 30, 2023, the Credit Agreement comprised the following term and revolving tranches:

	Maturity Date	Value Drawn or Utilized as of June 30, 2023		Applicable Interest Rate as of June 30, 2023
Term Tranches
U.S. term loans Tranche B-2	February 5, 2026	$	935	SOFR (floor of 0.000%) + 3.250%
U.S. term loans Tranche B-3	September 24, 2028	$	998	SOFR (floor of 0.500%) + 3.250%
Revolving Tranche(1)
U.S. Revolving Loans	August 5, 2024	$	50		—

(1)The Revolving Tranche represents a $250 million facility. The amount utilized is in the form of letters of credit.

During the first quarter of 2023, we repaid $110 million of our U.S. term loans Tranche B-2. The repayment was first applied to the remaining U.S term loans Tranche B-2 quarterly amortization payments, thereby eliminating all remaining quarterly amortization payments for the U.S term loans Tranche B-2, with the residual balance applied to the outstanding principal balance due at maturity. During the second quarter of 2023, we repaid a further $180 million of our U.S. term loans Tranche B-2.

On April 17, 2023, we amended the Credit Agreement, replacing the LIBOR-based reference rate with a Secured Overnight Financing Rate (“SOFR”) based reference rate, effective for interest payments for the period commencing April 28, 2023. Other than the foregoing, the material terms of the Credit Agreement remain unchanged, and our election to use certain practical expedients under Accounting Standards Codification Topic 848: Reference Rate Reform resulted in no material impacts on our condensed consolidated financial statements.

On July 26, 2023, we further amended the Credit Agreement to extend the maturity date on our $250 million Revolving Tranche facility from August 5, 2024 to August 5, 2025. There were no other material changes to the terms of the Credit Agreement as a result of this amendment.

The weighted average contractual interest rates related to our U.S. term loans Tranche B-2 and B-3 for the six months ended June 30, 2023 and 2022 were 8.02%, 8.05%, 3.74% and 4.15%, respectively. Including the impact of interest rate swap agreements, which were entered into in the fourth quarter of 2022, the weighted average rate on our U.S. term loans was 7.71% for the six months ended June 30, 2023. The effective interest rates of our debt obligations under the Credit Agreement are not materially different from the contractual interest rates. Refer to Note 9, Financial Instruments, for additional details regarding the interest rate swap agreements.

PTVE and certain of its U.S. subsidiaries have guaranteed on a senior basis the obligations under the Credit Agreement to the extent permitted by law. The borrowers and the guarantors have granted security over substantially all of their assets to support the obligations under the Credit Agreement. This security is expected to be shared on a first priority basis with the holders of the Notes.

Indebtedness under the Credit Agreement may be voluntarily repaid, in whole or in part, and must be mandatorily repaid in certain circumstances. We are required to make quarterly amortization payments of 0.25% of the principal amount of our U.S. term loans Tranche B-3. Additionally, we are required to make annual prepayments of term loans with up to 50% of excess cash flow (which will be reduced to 25% or 0% if specified senior secured first lien leverage ratios are met) as determined in accordance with the Credit Agreement. No excess cash flow prepayments were due for the year ended December 31, 2022.

The Credit Agreement contains customary covenants which restrict us from certain activities including, among others, incurring debt, creating liens over assets, selling assets and making restricted payments, in each case except as permitted under the Credit Agreement.

Notes

As of June 30, 2023, our outstanding Notes were as follows:

	Maturity Date	Interest Payment Dates
4.000% Senior Secured Notes due 2027	October 15, 2027	April 15 and October 15
4.375% Senior Secured Notes due 2028	October 15, 2028	April 15 and October 15

The effective interest rates of our debt obligations under the Notes are not materially different from the contractual interest rates.

PTVE and certain of its U.S. subsidiaries have guaranteed on a senior basis the obligations under the Notes (as defined below) to the extent permitted by law. The issuers and the guarantors have granted security over substantially all of their assets to support the obligations under the Notes. This security is expected to be shared on a first priority basis with the creditors under the Credit Agreement.

The respective indentures governing the 4.000% Senior Secured Notes due 2027 (“4.000% Notes”) and the 4.375% Senior Secured Notes due 2028 (together with the 4.000% Notes, the “Notes”) contain customary covenants which restrict us from certain activities including, among others, incurring debt, creating liens over assets, selling assets and making restricted payments, in each case except as permitted under the respective indentures governing the Notes.

Under the respective indentures governing the Notes, we can, at our option, elect to redeem the Notes under terms and conditions specified in the indentures. Under the respective indentures governing the Notes, in certain circumstances which would constitute a change in control, the holders of the Notes have the right to require us to repurchase the Notes at a premium.

Pactiv Debentures

As of June 30, 2023, our outstanding debentures (together, the “Pactiv Debentures”) were as follows:

	Maturity Date	Interest Payment Dates
7.950% Debentures due 2025	December 15, 2025	June 15 and December 15
8.375% Debentures due 2027	April 15, 2027	April 15 and October 15

The effective interest rates of our debt obligations under the Pactiv Debentures are not materially different from the contractual interest rates.

The Pactiv Debentures are not guaranteed and are unsecured.

The indentures governing the Pactiv Debentures contain a negative pledge clause limiting the ability of certain of our entities, subject to certain exceptions, to (i) incur or guarantee debt that is secured by liens on “principal manufacturing properties” (as such term is defined in the indentures governing the Pactiv Debentures) or on the capital stock or debt of certain subsidiaries that own or lease any such principal manufacturing property and (ii) sell and then take an immediate lease back of such principal manufacturing property.

The 8.375% Debentures due 2027 may be redeemed at any time at our option, in whole or in part, at a redemption price equal to 100% of the principal amount thereof plus a make-whole premium, if any, plus accrued and unpaid interest to the date of the redemption.

Other borrowings

Other borrowings represented finance lease obligations of $45 million and $49 million as of June 30, 2023 and December 31, 2022, respectively.

Scheduled maturities

Below is a schedule of required future repayments on our debt outstanding as of June 30, 2023:

2023	$	9
2024		17
2025		233
2026		951
2027		1,183
Thereafter		1,469
Total principal amount of borrowings	$	3,862

Fair value of our long-term debt

The fair value of our long-term debt as of June 30, 2023 and December 31, 2022 is a Level 2 fair value measurement. Below is a schedule of carrying values and fair values of our debt outstanding:

	As of June 30, 2023				As of December 31, 2022
	Carrying Value		Fair Value		Carrying Value		Fair Value
Credit Agreement	$	1,923	$	1,931	$	2,217	$	2,206
Notes:
4.000% Senior Secured Notes due 2027		994		894		993		890
4.375% Senior Secured Notes due 2028		496		438		496		447
Pactiv Debentures:
7.950% Debentures due 2025		216		220		215		210
8.375% Debentures due 2027		166		170		166		162
Other		45		45		49		49
Total	$	3,840	$	3,698	$	4,136	$	3,964

Interest expense, net

Interest expense, net consisted of the following:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2023			2022			2023			2022
Interest expense:
Credit Agreement	$	43		$	23		$	86		$	44
Notes		16			16			31			31
Pactiv Debentures		8			9			16			19
Interest income		(3	)		(1	)		(7	)		(1	)
Amortization of DIC and OID		1			1			2			2
Realized derivative gains		(2	)		—			(3	)		—
Net foreign currency exchange losses		—			—			—			1
Other		1			2			2			3
Interest expense, net	$	64		$	50		$	127		$	99