Debt

9 Months Ended

Sep. 30, 2021

Debt Disclosure [Abstract]

Debt

Debt

The Company’s debt consists of the following:

(Dollars in millions)	September 30, 2021		December 31, 2020
4.0% Term loan due December 31, 2021(1)			$	—
7.5% Term loan due November 30, 2022(1)	139		139
5.0% Daylight term loan due October 15, 2024(1)	98		98
Borrowings under revolving credit facility(1)	75		—
Finance lease and other	160		163
Short-term borrowings	24		27
Total debt principal	496		427
Less unamortized debt issuance costs and discounts	—		—
Total debt, net	496		427
Less short-term borrowings and current portion of long-term debt	(124)		(53)
Total long-term debt	$	372	$	374

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(1)The Company’s debt with related parties consists of two term loans and a working capital credit facility with US Holding, as described below.

Term Loans

In January 2009, the Company entered into a credit agreement with its ultimate parent company, Finmeccanica S.p.A. (presently Leonardo S.p.A.) in the amount of $2 billion (the “2009 Credit Agreement”). The 2009 Credit Agreement was subsequently assigned to US Holding and has a maturity of November 30, 2022. The 2009 Credit Agreement provides for a term loan bearing interest at a rate of 7.5%, with interest payments due semi-annually on June 20 and December 20 in each year (the “7.5% Term loan”). The outstanding balance of the 7.5% Term loan at September 30, 2021 and December 31, 2020 was $139 million. The fair value of this term loan at September 30, 2021 and December 31, 2020 was $183 million and $182 million, respectively; however, the Company has the ability to prepay the outstanding principal balance at the carrying amount without penalty. During 2020, US Holding forgave $300 million of related party debt. This was treated as a capital transaction and the amount was recorded in additional paid-in capital, as US Holding is the Company’s parent.

In June 2017, the Company entered into an unsecured term loan with US Holding in the principal amount of $137.5 million, the proceeds of which were used to finance the acquisition of Daylight Solutions, Inc. (the “Daylight Term Loan”). The Daylight Term Loan had an outstanding balance of $98 million at September 30, 2021 and December 31, 2020 which approximates its fair value. The Daylight Term Loan matures on October 15, 2024. The Daylight Term Loan has an interest rate of 5.0%, with interest payments due semi-annually on April 15 and October 15.

Credit Facilities

The 2009 Credit Agreement provides for a revolving credit facility available for working capital needs of the Company (the “Revolving Credit Facility”). As of September 30, 2021 and December 31, 2020, the Revolving Credit Facility had a credit limit of $450 million and an interest rate of LIBOR plus 3.5%. There is a commitment fee of 0.25% applied to the unused balance of the Revolving Credit Facility and there are no compensating balance requirements. The outstanding balance as of September 30, 2021 was $75 million and there was no balance on the Revolving Credit Facility as of December 31, 2020.

The Company also maintains uncommitted working capital credit facilities with certain financial institutions in the aggregate of $60 million at September 30, 2021 and December 31, 2020, respectively (the “Financial Institution Credit Facilities”). The Financial Institution Credit Facilities are guaranteed by Leonardo S.p.A. The primary

purpose of the Financial Institution Credit Facilities is to support standby letter of credit issuances on contracts with customers and also includes a revolving facility with a maximum borrowing limit of $15 million, which bears interest at LIBOR plus 0.5%. At September 30, 2021 and December 31, 2020, there was no balance outstanding on the revolving facility. The Company had letters of credit outstanding of approximately $31 million as of September 30, 2021, and December 31, 2020, which reduces the available capacity of the Financial Institution Credit Facilities by an equal amount.

Short-term Borrowings

As of September 30, 2021 and December 31, 2020, the Company recognized $24 million and $27 million, respectively, collected on behalf of the buyers of our trade receivables pursuant to our factoring arrangements as short-term borrowings and current portion of long-term debt in the Consolidated Balance Sheet, which approximates its fair value. Refer to Note 3: Accounts Receivable for more information.