

7. Debt and Financing Arrangements

Long-term debt consisted of the following:



(in millions)	December 31, 2018			September 30, 2018
Term Loan A - LIBOR plus 1.75% due in 2021	$	1,200		$	1,200
4.875% Notes due in 2026	900			900
3.50% Notes due in 2024	1,143			1,162
European Investment Bank Loan - EURIBOR plus 0.90% due in 2022	189			192
Capital lease obligations	2			2
Less: debt issuance costs	(33		)	(32		)
Gross long-term debt	3,401			3,424
Less: current portion	2			2
Net long-term debt	$	3,399		$	3,422

On July 27, 2016, Adient Global Holdings Ltd ("AGH"), a wholly owned subsidiary of Adient, entered into a credit agreement providing for commitments with respect to a $1.5 billion revolving credit facility (undrawn at December 31, 2018 and September 30, 2018, respectively) and a $1.5 billion Term Loan A facility (the "Original Credit Facilities"). The Original Credit Facilities mature in July 2021. Until the Term Loan A maturity date, amortization of the funded Term Loan A is required in an amount per quarter equal to 1.25% of the original principal amount prior to July 27, 2019 and 2.5% in each quarter thereafter prior to final maturity. The Original Credit Facilities contain covenants that include, among other things and subject to certain significant exceptions, restrictions on Adient's ability to declare or pay dividends, make certain payments in respect of the notes, create liens, incur additional indebtedness, make investments, engage in transactions with affiliates, enter into agreements restricting Adient's subsidiaries' ability to pay dividends, dispose of assets and merge or consolidate with any other person. The Term Loan A facility also requires mandatory prepayments in connection with certain non-ordinary course asset sales and insurance recovery and condemnation events, among other things, and subject in each case to certain significant exceptions.

On November 6, 2018, Adient entered into an amendment to the Original Credit Facilities (“First Amended Credit Facilities") whereby the financial maintenance covenant was amended to require Adient to maintain a total net leverage ratio equal to or less than 4.5x adjusted EBITDA (previously 3.5x adjusted EBITDA), with step down provisions starting in the quarter ending December 31, 2020. The amendment also expanded the upper range of interest rate margins such that the drawn portion of the First Amended Credit Facilities will bear interest based on LIBOR plus a margin between 1.25% - 2.50% (previously 1.25% - 2.25%), based on Adient’s total net leverage ratio. No other terms were impacted by the first amendment. On February 6, 2019, Adient entered into an amendment to the First Amended Credit Facilities (“Second Amended Credit Facilities") whereby the financial maintenance covenant contained in the First Amended Credit Facilities was amended to require Adient to maintain a first lien secured net leverage ratio equal to or less than 2.5x adjusted EBITDA as of the last day of each quarter, with step down provisions starting on September 30, 2020. The amendment also added a new tier to the pricing schedule that will be applicable when the total net leverage ratio exceeds 4.0x adjusted EBITDA and amended certain other definitions, negative covenants and other terms within the credit facility.

The full amount of the Term Loan A facility was drawn in the fourth quarter of fiscal 2016. These funds were transferred to the former Parent at the time of the draw and were reflected within net transfers to the former Parent in the consolidated statement of cash flow during the fourth quarter of fiscal 2016. In February 2017, Adient repaid $100 million of the Term Loan A facility. In May 2017, Adient repaid another $200 million of the Term Loan A facility. The total amount repaid was treated as a prepayment of the quarterly mandatory principle amortization for the period between March 2017 and June 2020 resulting in no required principal payment until June 2020.

AGH will pay a commitment fee on the unused portion of the commitments under the revolving credit facility based on the total net leverage ratio of Adient, ranging from 0.15% to 0.45%.

On August 19, 2016, AGH issued $0.9 billion aggregate principal amount of 4.875% USD-denominated unsecured notes due 2026 and €1.0 billion aggregate principal amount of 3.50% unsecured notes due 2024, in a private offering exempt from the registration requirements of the Securities Act of 1933, as amended. The proceeds of the notes were used, together with the Term Loan A facility, to pay a distribution to the former Parent, with the remaining proceeds used for working capital and general corporate purposes.

On May 29, 2017, Adient Germany Ltd. & Co. KG, a wholly owned subsidiary of Adient, borrowed €165 million in an unsecured term loan from the European Investment Bank due in 2022. The loan bears interest at the 6-month EURIBOR rate plus 90 basis points. Loan proceeds were used to repay $200 million of the Term Loan A.

Net Financing Charges

Adient's net financing charges line item in the consolidated statements of income contained the following components:



	Three Months Ended December 31,
(in millions)	2018			2017
Interest expense, net of capitalized interest costs	$	36		$	34
Banking fees and debt issuance cost amortization	3			2
Interest income	(2		)	(1		)
Net foreign exchange	(2		)	(2		)
Net financing charges	$	35		$	33