Debt including Capital Lease Obligations

2018 Senior Notes

On January 24, 2018, we issued $300.0 million aggregate principal amount of 4.50 percent senior unsecured notes due 2026 (the “Notes”). The Notes were issued pursuant to an indenture dated as of January 24, 2018 (the “Indenture”), by and among Ingevity, the subsidiary guarantors party thereto and U.S. Bank National Association, as trustee. The Notes were offered and sold only to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A and to certain non-U.S. persons outside the United States pursuant to Regulation S under the Securities Act of 1933, as amended (the “Securities Act”). The Notes have not been registered under the Securities Act or any state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state laws.

The net proceeds from the sale of the Notes, after deducting deferred financing fees of $5.6 million were approximately $294.4 million. We intend to use the net proceeds from the sale of the Notes to finance our planned purchase of substantially all the assets primarily used in the pine chemicals business of Georgia-Pacific Chemicals LLC and Georgia-Pacific LLC and for general corporate purposes.

Interest payments on the Notes are due semiannually in arrears on February 1st and August 1st of each year, beginning on August 1, 2018, at a rate of 4.50 percent per year. The Notes will mature on February 1, 2026.

The Indenture contains certain customary covenants (including covenants limiting Ingevity and our restricted subsidiaries’ ability to grant or permit liens on certain property securing debt, declare or pay dividends, make distributions on or repurchase or redeem capital stock, make investments in unrestricted subsidiaries, engage in sale and lease-back transactions, and engage in a consolidation or merger, or sell, transfer or otherwise dispose of all or substantially all of the assets of our and our restricted subsidiaries, taken as a whole) and events of default (subject in certain cases to customary exceptions, as well as grace and cure periods). The occurrence of an event of default under the Indenture could result in the acceleration of the Notes and could cause a cross-default that could result in the acceleration of other indebtedness of Ingevity and our subsidiaries.

Revolving Credit and Term Loan Facility Amendment

On August 21, 2017, we entered into an Incremental Facility Agreement and Amendment No. 1 (the “Amendment”) to our existing Credit Agreement, dated as of March 7, 2016 (the “Existing Credit Agreement,” and as amended by the Amendment, the “Amended Credit Agreement”). Among other things, the Amendment (i) established incremental term loan commitments in the aggregate principal amount of $75.0 million (the incremental term loans made pursuant thereto, the “Incremental Term Loans”) and (ii) increased the revolving commitments under the Existing Credit Agreement by $150.0 million (the “Incremental Revolving Commitments”). The Amendment also extended the maturity date for the loans and commitments under the Existing Credit Agreement by one year, to May 9, 2022.

The Incremental Term Loans have terms identical to those of the Term A Loans under the Existing Credit Agreement (the "Term A Loans"), as modified by the Amended Credit Agreement, and will be treated as a single class with such existing Term A Loans under the Amended Credit Agreement. The Incremental Revolving Commitments have terms identical to those of the Revolving Commitments under the Existing Credit Agreement, as modified by the Amended Credit Agreement, and will be treated as a single class with such existing commitments under the Amended Credit Agreement.

Loans under the Amended Credit Agreement, including the Incremental Term Loans and loans with respect to the Incremental Revolving Commitments, bear interest at either (a) an adjusted base rate or (b) an adjusted LIBOR rate, in each case, plus an applicable margin, in the case of base rate loans, ranging between 0.25 percent and 1.00 percent, and in the case of adjusted LIBOR rate loans, ranging between 1.25 percent and 2.00 percent. The applicable margin is based on a total leverage based pricing grid. Fees to revolving lenders under the Amended Credit Agreement, including fees in respect of the Incremental Revolving Commitments, include (i) commitment fees, based on a percentage of the daily unused portions of the facility, ranging from 0.15 percent to 0.30 percent and (ii) customary letter of credit fees.

As consideration for the Amendment, the Company paid to each lender under the Existing Credit Agreement a consent fee equal to 0.05 percent of the aggregate principal amount of the commitments and outstanding loans held by such lender immediately prior to the Closing Date.

The credit facilities under the Amended Credit Agreement, including the incremental facilities described herein, will mature on May 9, 2022. The Incremental Term Loans and Term A Loans amortize at a rate equal to 0 percent per annum during the first and second years after the initial funding date of May 9, 2016, 5 percent per annum during the third and fourth years after the initial funding date and 10 percent per annum during the fifth and sixth years after the initial funding date, with the balance due at maturity.

Fees incurred to secure the Amended Credit Agreement have been deferred and will be amortized over the term of the arrangement.

The Amendment also makes certain additional modifications to the terms of the Existing Credit Agreement and related loan documents, including an increase of the maximum consolidated total leverage ratio permitted thereunder from 3.75 to 1.00 to 4.00 to 1.00 (which may be increased to 4.50 to 1.00 under certain circumstances). We were in compliance with all covenants at December 31, 2017.

As part of the Separation, WestRock required Ingevity to contribute $68.9 million in a trust managed by Bank of New York in order to secure repayment of the capital lease obligation at maturity. The trust, presented as restricted investment on our consolidated balance sheet, purchased long term bonds that mature in 2025 and 2026. The principal received at maturity of the bonds along with interest income that is reinvested in the trust are expected to be equal to or more than the $80.0 million capital lease obligation that is due in 2027. Because the provisions of the trust provide us the ability, and it is our intent, to hold the investments to maturity, the investments held by the trust are accounted for as held to maturity; therefore, they are held at their amortized cost. The fair value of the investments within the trust was $69.6 million and $67.1 million as of December 31, 2017 and 2016, respectively (see Note 5 for more information). The investments held by the trust earn interest at the stated coupon rate of the invested bonds. Interest earned on the investments held by the trust is recognized as interest income and presented within Interest income on our consolidated statement of operations.

Current and Long-term debt including capital lease obligations consisted of the following:



	December 31, 2017		December 31,
In millions	Interest rate	Maturity date	2017		2016
Revolving Credit Facility ⁽¹⁾	2.81%	2022	$	—	$	111.9
Term Loan Facility	2.82%	2022	375.0		300.0
Capital lease obligations	7.67%	2027	80.0		80.0
Total debt including capital lease obligations			$	455.0	$	491.9
Less: debt issuance costs			1.6		3.1
Total debt including capital lease obligations, net of debt issuance costs			$	453.4	$	488.8
Less: debt maturing within one year ⁽²⁾			9.4		7.5
Long-term debt including capital lease obligations			$	444.0	$	481.3

_______________


(1)	Letters of credit outstanding under the revolving credit facility were $1.8 million and $3.7 million and available funds under the facility were $548.2 million and $284.4 million at December 31, 2017 and December 31, 2016, respectively.


(2)	Debt maturing within one year is included in "Current maturities of long-term debt" on the consolidated balance sheet.