9. DEBT AND FINANCING OBLIGATIONS

At May 28, 2017 and May 29, 2016, our debt, including financing obligations, was as follows (dollars in millions):


	May 28,		May 29,
	2017		2016
Short-term borrowings:
Revolving credit facility	$	4.5	$	—
Other credit facilities		17.5		24.9
		22.0		24.9
Long-term debt:
Term loan facility, due 2021		666.6		—
4.625% senior notes, due 2024		833.0		—
4.875% senior notes, due 2026		833.0		—
6.25% installment notes, due 2017		—		10.1
LIBOR plus a margin (1.90% to 2.30%) and 4.34%, installment notes due on various dates through June 2031		29.5		30.0
		2,362.1		40.1
Financing obligations:
4.35% lease financing obligation due May 2030		68.2		69.7
2.00% to 3.32% lease financing obligations due on various dates through 2040		7.7		8.3
		75.9		78.0

Total debt and financing obligations		2,460.0		143.0
Debt issuance costs		(35.1)		—
Short-term borrowings		(22.0)		(24.9)
Current portion of long-term debt and financing obligations		(37.9)		(13.5)
Long-term debt, excluding current portion	$	2,365.0	$	104.6

In November 2016, as part of the Separation, Lamb Weston issued $2,341.0 million of debt, which included $1,666.0 million of aggregate principal amount of 4.625% and 4.875% senior notes (together, “Senior Notes”) and $675.0 million of borrowings under a five-year senior secured credit agreement (“Credit Agreement”) with a syndicate of lenders. The Credit Agreement consists of a five-year amortizing $675.0 million term loan facility (“Term Loan Facility”) and a five-year non-amortizing $500.0 million revolving credit facility (“Revolving Credit Facility” and, together with the Term Loan Facility, “Credit Facilities”). The Credit Agreement is secured by security interests and liens on substantially all of our and each guarantor’s assets, as long as Lamb Weston remains below investment grade by both Moody’s and Standard & Poor’s. Of the $1,666.0 million of Senior Notes, $1,542.9 million aggregate principal amount from the Senior Notes were distributed directly to Conagra, and we used the proceeds of $123.1 million of Senior Notes, together with $700.4 million of borrowings under the Credit Facilities, to fund an $823.5 million cash payment to Conagra at the time of the Separation. The $1,542.9 million of Senior Notes distributed directly to Conagra was considered a non-cash financing activity for Lamb Weston.

We issued the following debt in connection with the Separation:

Revolving Credit Facility: A five-year nonamortizing $500.0 million revolving credit facility with variable annual interest, under which $4.5 million was outstanding on May 28, 2017. In addition to paying interest, we pay an annual commitment fee for undrawn amounts at a rate of 0.25% to 0.40% depending on our consolidated net leverage ratio.

Term Loan Facility: A five-year $675.0 million term loan amortizing in equal quarterly installments for a total of 5% annually, commencing in March 2017, with the balance payable in November 2021.

4.625% Senior Notes: An eight-year $833.0 million senior debt obligation with fixed annual interest, due November 1, 2024.

4.875% Senior Notes: A ten-year $833.0 million senior debt obligation with fixed annual interest, due November 1, 2026.

Credit Facilities

Borrowings under the Credit Facilities bear interest at a floating rate per annum based upon the Base Rate or the Eurocurrency rate, in each case, plus an applicable margin which varies based upon our consolidated net leverage ratio. Margins range from 0.500% to 1.250% for Base Rate loans and from 1.500% to 2.250% for Eurocurrency Rate loans. The Base Rate is defined as the highest of (a) Bank of America’s prime rate, (b) the federal funds rate plus 0.500%, and (c) the Eurocurrency Rate with a term of one month plus 1.0%.

Upon the occurrence of an event of default, among other things, amounts outstanding under the Credit Agreement may be accelerated and the commitments may be terminated. Our obligations under the Credit Agreement are guaranteed by certain of our direct and indirect domestic subsidiaries on the terms set forth in the Credit Agreement. The Credit Agreement has a maturity date of November 9, 2021.

At May 28, 2017, we had $4.5 million of borrowings outstanding under our Revolving Credit Facility. At May 28, 2017, we had $493.7 million of availability on our Revolving Credit Facility, which is net of outstanding letters of credit of $1.8 million. For the period from November 28, 2016 through May 28, 2017, borrowings under our Revolving Credit Facility ranged from a low of $4.5 million to a high of $100.0 million. For the period from November 9, 2016, through May 28, 2017, the weighted average interest rate for our outstanding borrowings under the Revolving Credit Facility was 3.03%.

We are required to maintain the following financial covenant ratios under the Credit Agreement:

Total net leverage ratio of 5.50 to 1.00, decreasing ratably to 4.50 to 1.00 on August 25, 2019 through maturity; and

Interest coverage ratio of 2.75 to 1.00.

Our obligations under the Credit Facilities are guaranteed jointly and severally on a senior secured basis by each of our existing and future direct or indirect wholly owned domestic restricted subsidiaries, subject to an exclusion of immaterial subsidiaries.

The Credit Agreement and the indentures governing the Senior Notes contain covenants that, subject to exceptions, limit our ability and the ability of our subsidiaries to, among other things, incur, assume or guarantee additional indebtedness, pay distributions on, redeem or repurchase capital stock or redeem or repurchase subordinated debt, make loans and investments, incur or suffer to exist liens, sell, transfer or otherwise dispose of assets, enter into agreements that restrict distributions or other payments from restricted subsidiaries to us, engage in transactions with affiliates, designate subsidiaries as unrestricted or restricted, and consolidate, merge, amalgamate or transfer all or substantially all of our assets.

4.625% and 4.875% Senior Notes

The Senior Notes are senior unsecured obligations and rank equally with all of our present and future senior indebtedness, senior to all our future subordinated indebtedness and effectively subordinated to all of our present and future senior secured indebtedness (including all borrowings with respect to the Credit Facilities to the extent of the value of the assets securing such indebtedness). Interest on the Senior Notes is due semiannually. Upon a change of control (as defined in the indentures governing the Senior Notes), we must offer to repurchase the Senior Notes at 101% of the principal amount, plus accrued and unpaid interest.

We may redeem all or a portion of the 4.625% Senior Notes at any time on or after November 1, 2021, at declining prices starting at 102.313%, plus accrued and unpaid interest. We may redeem all or a portion of the 4.875% Senior Notes at any time on or after November 1, 2021, at declining prices starting at 102.438%, plus accrued and unpaid interest. Prior to November 1, 2021, we may redeem Senior Notes of either series, in whole at any time or in part, from time to time, at a price equal to 100% of the principal amount thereof, plus a make-whole premium, plus accrued and unpaid interest. We may also redeem up to 35% of the aggregate principal amount of either series of Senior Notes on or prior to November 1, 2019 in an aggregate amount equal to the net proceeds from certain equity offerings at redemption prices equal to 104.625% for the 4.625% Senior Notes and 104.875% for the 4.875% Senior Notes, plus, in each case, accrued and unpaid interest.

The Senior Notes are jointly and severally guaranteed on a senior unsecured basis by our domestic subsidiaries that guarantee our obligations under the Credit Agreement.

Other

The aggregate minimum principal maturities of our long-term debt, including current portion, for the next five fiscal years and thereafter, are as follows (dollars in millions):


			Financing
	Debt (a)		Obligations		Total
2018	$	57.2	$	2.7	$	59.9
2019		35.4		2.5		37.9
2020		35.4		2.4		37.8
2021		35.5		2.1		37.6
2022		533.4		2.4		535.8
Thereafter		1,687.2		63.8		1,751.0
	$	2,384.1	$	75.9	$	2,460.0

(a)

Debt includes $4.5 million of borrowings on the Revolving Credit Facility in the remainder of fiscal 2017 and $17.5 million under our other credit facilities in 2018.

Conagra paid $25.4 million of costs in connection with the debt issuances described above and we paid $12.3 million. We amortize the costs in interest expense using the effective interest method over the life of the loans. In fiscal 2017, we recorded $2.5 million of amortization expense in “Interest expense” in our Combined and Consolidated Statements of Earnings.

Since the Separation during fiscal 2017, we have paid $48.8 million of interest on debt.

Other Credit Facilities

We have $58.0 million of other credit facilities, under which $17.5 million and $24.9 million were outstanding at May 28, 2017 and May 29, 2016, respectively. These facilities consist of an overdraft line, a fixed asset commitment, and a working capital facility. Borrowings under the facilities bear interest at a percentage of the stated rate, 4.35% at May 28, 2017, and may be prepaid without penalty. We guarantee the full amount of our subsidiary’s obligations to the financial institution up to the maximum amount of the credit facility.

Financing Obligations

During fiscal 2010, we completed the sale of approximately 17,600 acres of farmland to an unrelated buyer and immediately entered into an agreement with an affiliate of the buyer to lease back the farmland. Lamb Weston’s performance under the lease is guaranteed by Conagra. Conagra’s guarantee precludes accounting for this transaction as a sale and leaseback and, accordingly, the $75.0 million of proceeds received have been treated as a financing obligation and the land and related equipment remain on our Combined and Consolidated Balance Sheets. At May 28, 2017 and May 29, 2016, the remaining balance of the financing obligation was $68.2 million and $69.7 million, respectively, and the net carrying value of the related property was $39.9 million and $40.5 million, respectively. The lease agreement has a remaining initial term of three years and two five-year renewal options.