DEBT

The following table summarizes Valvoline’s short-term borrowings and long-term debt as of September 30:



(In millions)	2018			2017
2025 Notes	$	400		$	400
2024 Notes	375			$	375
Term Loans	270			285
Revolver	147			—
Trade Receivables Facility	140			75
Other ^(a)	(10		)	(11		)
Total debt	$	1,322		$	1,124
Short-term debt	—			75
Current portion of long-term debt	30			15
Long-term debt	$	1,292		$	1,034


(a)	As of September 30, 2018, other includes $11 million of debt issuance costs and discounts and $1 million of debt primarily acquired through acquisitions. As of September 30, 2017, other included $13 million of debt issuance costs and discounts and $2 million of debt acquired through acquisitions.

Senior Notes

During August 2017, Valvoline completed the issuance of 4.375% senior unsecured notes due 2025 with an aggregate principal amount of $400 million. The net proceeds from the offering of the 2025 Notes were $394 million (after deducting initial purchasers’ discounts and debt issuance costs), which were used to make a voluntary contribution to the Company’s qualified U.S. pension plan.

During July 2016, Valvoline completed the issuance of 5.500% senior unsecured notes due 2024 with an aggregate principal amount of $375 million. The net proceeds from the offering of the 2024 Notes were $370 million (after deducting initial purchasers’ discounts and debt issuance costs), which were transferred to Valvoline’s former parent, Ashland.

The Senior Notes are subject to customary events of default for similar debt securities, which if triggered may accelerate the payment of principal, premium, if any, and accrued but unpaid interest on the notes. Such events of default include non-payment of principal and interest, non-performance of covenants and obligations, default on other material debt, and bankruptcy or insolvency. If a change of control repurchase event occurs, Valvoline, may be required to offer to purchase the Senior Notes from the holders thereof. The Senior Notes are not otherwise required to be repaid prior to maturity, although they may be redeemed at the option of Valvoline at any time prior to their maturity in the manner specified in the governing indentures. The Senior Notes are guaranteed by each of Valvoline’s subsidiaries that guarantee obligations under the existing senior credit facility described below.

Valvoline completed registered exchange offers for the Senior Notes in December 2017, for which no additional proceeds were received.

Senior Credit Agreement

The 2016 Senior Credit Agreement provides for an aggregate principal amount of $1,325 million in senior secured credit facilities (“2016 Credit Facilities”), comprised of (i) a five-year $875 million term loan facility (“Term Loans”), and (ii) a five-year $450 million revolving credit facility (including a $100 million letter of credit sublimit) (“Revolver”). As of September 30, 2018 and 2017, the Term Loans had outstanding principal balances of $270 million and $285 million, respectively. As of September 30, 2018, there was $147 million outstanding under the Revolver, and there was no amount outstanding as of September 30, 2017. During the year ended September 30, 2018, Valvoline borrowed $204 million and made payments of $57 million on the Revolver. As of September 30, 2018, the total borrowing capacity remaining under the Revolver was $293 million due to a reduction of $10 million for letters of credit outstanding.

The outstanding principal balance of the Term Loans is required to be repaid in quarterly installments of approximately $8 million for each of fiscal 2019 and 2020, $15 million for fiscal 2021, with the balance due at maturity. At Valvoline’s option, amounts outstanding under the 2016 Senior Credit Agreement bear interest at either LIBOR or an alternate base rate, in each case plus the applicable interest rate margin. The interest rate fluctuates between LIBOR plus 1.500% per annum and LIBOR plus 2.500% per annum (or between the alternate base rate plus 0.500% per annum and the alternate base rate plus 1.500% annum), based upon Valvoline’s corporate credit ratings or the consolidated first lien net leverage ratio (as defined in the 2016 Senior Credit Agreement).

The 2016 Credit Facilities are guaranteed by Valvoline’s existing and future subsidiaries (other than certain immaterial subsidiaries, joint ventures, special purpose financing subsidiaries, regulated subsidiaries, non-U.S. subsidiaries and certain other subsidiaries), and are secured by a first-priority security interest in substantially all the personal property assets and certain real property assets of Valvoline and the guarantors, including all or a portion of the equity interests of certain of Valvoline’s domestic subsidiaries and first-tier non-U.S. subsidiaries. The 2016 Credit Facilities may be prepaid at any time without premium.

The 2016 Senior Credit Agreement contains usual and customary representations and warranties and usual and customary affirmative and negative covenants, including limitations on liens, additional indebtedness, investments, restricted payments, asset sales, mergers, affiliate transactions and other customary limitations, as well as financial covenants (including maintenance of a maximum consolidated net leverage ratio and a minimum consolidated interest coverage ratio). As of the end of any fiscal quarter, the maximum consolidated net leverage ratio and minimum consolidated interest coverage ratio permitted under the 2016 Senior Credit Agreement are 4.5 and 3.0, respectively. As of September 30, 2018, Valvoline was in compliance with all covenants under the 2016 Senior Credit Agreement.

Trade Receivables Facility

On November 29 2016, Valvoline entered into a $125 million, one-year revolving trade receivables securitization facility (“Trade Receivables Facility”) with certain financial institutions. On November 20, 2017, the Company amended the Trade Receivables Facility to extend the maturity date to November 19, 2020 and increase the maximum funding under the facility to $175 million based on the availability of eligible receivables and other customary factors and conditions.

Under the Trade Receivables Facility, Valvoline sells and/or transfers a majority of its U.S. trade receivables to a wholly-owned, bankruptcy-remote subsidiary as they are originated, and advances by the lenders to that subsidiary (in the form of cash or letters of credit) are secured by those trade receivables. The assets of this financing subsidiary are restricted as collateral for the payment of its obligations under the Trade Receivables Facility, and its assets and credit are not available to satisfy the debts and obligations owed to the creditors of the Company. The Company includes the assets, liabilities and results of operations of this financing subsidiary in its consolidated financial statements.

During the first fiscal quarter of 2017, Valvoline borrowed $75 million under the Trade Receivables Facility and used the net proceeds to repay an equal amount of the Term Loans. During the year ended September 30, 2018, Valvoline made payments of $36 million and borrowed $101 million under the Trade Receivables Facility, using the proceeds to supplement the Company’s daily cash needs.

The Company accounts for the Trade Receivables Facility as secured borrowings. Based upon the maturity dates in place in each respective period, as of September 30, 2018, the $140 million balance outstanding was classified as Long-term debt and the $75 million balance at September 30, 2017 was classified as Short-term debt in the Consolidated Balance Sheets. Based on the availability of eligible receivables, the total borrowing capacity remaining under the Trade Receivables Facility as of September 30, 2018 was approximately $35 million. The financing subsidiary owned $275 million and $247 million of outstanding accounts receivable as of September 30, 2018 and 2017, respectively, and these amounts are included in Accounts receivable, net in the Company’s Consolidated Balance Sheets.

The financing subsidiary pays customary fees to the lenders, and advances by a lender under the Trade Receivables Facility accrue interest for which the weighted average interest rates were 2.8% and 1.8% for the years ended September 30, 2018 and 2017, respectively. The Trade Receivables Facility contains various customary affirmative and negative covenants and default and termination provisions, which provide for acceleration of amounts owed under the Trade Receivables Facility in circumstances including, but not limited to, the failure to pay interest or other amounts when due, defaults on certain other indebtedness, certain insolvency events, and breach of representation.

Long-term debt maturities

The future maturities of debt outstanding as of September 30, 2018, excluding debt issuance costs and discounts, are as follows:



(In millions)
Years ending September 30
2019	$	30
2020	30
2021	497
2022	—
2023	—
Thereafter	776
Total	$	1,333