12. CREDIT FACILITIES AND INDEBTEDNESS

September 30,	2014			2013
Credit facility due April 2018	$	525.0		$	-
3.25% convertible notes due May 2014		-			850.0
7.5% bonds due June 2019		500.0			500.0
5.5% bonds due June 2020		300.0			300.0
5.35% bonds due October 2023		500.0			500.0
Total principal debt obligations (at face)		1,825.0			2,150.0

Discounts:
3.25% convertible notes		-			(23.3	)
7.5% bonds		(1.5	)		(1.8	)
5.5% bonds		(0.8	)		(0.9	)
5.35% bonds		(1.9	)		(2.1	)

Swap FV adjustments (See Note 11):
7.5% bonds		38.5			48.4
5.5% bonds		19.3			22.6
Total outstanding debt recorded, net	$	1,878.6		$	2,192.9

		2015				2016				2017				2018				2019				Thereafter				Total
Expected principal payments		$	-			$	-			$	-			$	525.0			$	500.0			$	800.0			$	1,825.0

IGT was compliant with all covenants and no embedded features required bifurcation at September 30, 2014.

REVOLVING CREDIT FACILITY

At September 30, 2014, $525.0 million was outstanding under our $1.0 billion revolving credit facility, amended and restated on April 23, 2013, $454.4 million was available, and $20.6 million was reserved for letters of credit, performance bonds, and bank guarantees. Of the $1.0 billion line, up to $50.0 million is available for letters of credit and up to $50.0 million is available for swing line borrowing. Subject to lender consent, the facility may be increased by $250.0 million at any time up to 60 days prior to maturity. All amounts outstanding will be immediately due and payable at maturity on April 23, 2018, which may be extended upon request for one year on the second closing date anniversary (April 23, 2015), presuming no default exists.

Interest rates and facility fees are based on our public debt ratings or net funded debt to EBITDA ratio (debt minus any unrestricted cash and investments in excess of $150.0 million), whichever is more favorable to IGT. At September 30, 2014, our pricing level was Baa2/BBB-, resulting in an interest rate of LIBOR plus 100 bps and a facility fee of 17.5 bps. Additional offering costs of $3.3 million were deferred along with previous credit facility deferred offering costs of $8.2 million, which together are amortizing to interest expense over the new 5-year term.

Our credit facility carries no limitations on share repurchases or dividend payments (see Note 1 about limitations related to the GTECH merger) provided no default exists and includes the following covenants (all terms as defined in the facility document):

●	a minimum ratio of 3.0 adjusted EBITDA to interest expense (interest coverage ratio)
●	a maximum ratio of 3.5 for net funded debt to adjusted EBITDA (net funded debt leverage ratio)
●	certain restrictions on our ability to:
	■	pledge the securities of our subsidiaries
	■	permit our subsidiaries to incur or guaranty additional debt, or enter into swap agreements
	■	incur liens
	■	merge with or acquire other companies, liquidate or dissolve
	■	sell, transfer, lease or dispose of all or substantially all assets
	■	change the nature of our business

The facility specifies certain events of default (some of which are subject to applicable grace or cure periods), including failure to make timely principal and interest payments or satisfy the covenants. An event of default, if not cured, could cause the entire outstanding borrowings under the credit facility to become immediately due and payable, lenders may cease making loans and/or terminate commitments, and cross-default provisions may be triggered in other debt issuances.

3.25% CONVERTIBLE NOTES

These notes were redeemed for cash at maturity on May 1, 2014. All hedges expired at maturity and the warrants expired on various dates through November 21, 2014. The elements of interest expense are reflected in the table below.

Years Ended September 30,	2014		2013		2012
Contractual interest expense	$	16.4	$	27.5	$	27.5
Discount amortization		23.4		36.7		33.4

BONDS OUTSTANDING

7.5% Bonds Due June 2019

On June 15, 2009, we issued $500.0 million aggregate principal amount of 7.50% bonds due 2019, under our March 2009 shelf registration statement and June 11, 2009 prospectus supplement, to certain underwriters pursuant to an underwriting agreement dated June 10, 2009. We received net proceeds of $493.3 million after a discount of $2.7 million and deferred offering costs of $4.0 million, which together are amortizing to interest expense over the 10-year term. Interest is payable semiannually on June 15 and December 15, beginning December 15, 2009 and the bonds mature on June 15, 2019. We used the net proceeds from these bonds to fund the redemption of a portion of our Debentures put to us in December 2009.

5.5% Bonds Due June 2020

On June 8, 2010, we issued $300.0 million aggregate principal amount of 5.50% bonds due 2020, under our March 2009 shelf registration statement and June 3, 2010 prospectus supplement pursuant to an underwriting agreement dated June 3, 2010. We received net proceeds of $295.7 million after a discount of $1.3 million and deferred offering costs of approximately $3.0 million, which together are amortizing to interest expense over the 10-year term. Interest is payable semiannually on June 15 and December 15, beginning December 15, 2010 and the bonds mature on June 15, 2020. Net proceeds from these bonds were used to reduce outstanding amounts under our domestic credit facility.

5.35% Bonds Due October 2023

On September 19, 2013, we issued $500.0 million aggregate principal amount of 5.35% bonds due 2023, under our March 2012 shelf registration statement, March 29, 2012 prospectus, and September 13, 2013 prospectus supplement pursuant to an underwriting agreement dated September 12, 2013. We received net proceeds of $493.9 million after a discount of $2.1 million and deferred offering costs of $4.0 million, which together are amortizing to interest expense over the 10-year term. Interest is payable semiannually on April 15 and October 15 and the bonds mature on October 15, 2023. Net proceeds from these bonds were used to fund the redemption of our convertible notes in May 2014 and for general corporate purposes.

Treasury Locks

During 2013, we executed interest rate lock transactions to reduce exposure to fluctuations in treasury interest rates in anticipation of the 5.35% Bonds issued on September 19, 2013. These transactions fixed the treasury yield component of the coupon rate on an aggregate notional amount of $250 million and matured on August 15, 2013 and September 19, 2013. There was no ineffectiveness. The total gain of $12.6 million was recorded to AOCI, net of $4.6 million tax, and is being amortized over the 10-year term of the 5.35% Bonds as a yield adjustment to reduce interest expense.

Additional Bond Terms

Each of our bonds are general unsecured unsubordinated obligations of IGT, ranking equal with all existing and future unsecured and unsubordinated obligations. The bonds rank junior to all existing and future liabilities, including trade payables, of our subsidiaries. IGT may redeem the bonds earlier than the maturity date by paying the holders 100% of the principal amount plus a make-whole redemption premium as described further in each indenture.

Each of our bonds contain covenants, which may in certain circumstances restrict our ability to incur additional debt, limit our ability to enter into sale and leaseback transactions, or restrict our ability to sell, transfer, lease or dispose of substantially all assets. Further, each of the bonds specify certain events of default, some of which are subject to applicable grace or cure periods, including the failure to make timely principal and interest payments or satisfy the covenants. Upon the occurrence of an event of default under the bonds, outstanding amounts may become due and payable immediately. Except for the 7.5% bondholder amendment described below, if a change of control repurchase event occurs, bondholders may require us to purchase all or a portion of their bonds for cash.

Certain interest rate derivatives (swaps and treasury locks) have been executed related to our bonds and are further described in Notes 11 and 12.

Bondholder Amendments

On October 20, 2014, the requisite consents were received on our 7.5% bonds solicited on October 8, 2014 in connection with the proposed GTECH merger (see Note 1). A cash fee of $2.50 per bond was offered to the 7.5% bondholders who consented to the following amendments: (1) exclude the merger of IGT and GTECH from the definition of "Change of Control"; and (2) following the merger, apply the definition of "Change of Control" to the post-merger parent of IGT (Holdco), and permit Holdco to furnish the financial reports that are currently required to be furnished by IGT. IGT will record an increase to deferred offering costs and APIC for the consent fees and related professional fees collectively totaling approximately $1.8 million, which will be paid by GTECH.

To assure that all IGT bondholders will generally benefit equally and ratably from at least the same subsidiary guarantees afforded to other Holdco debt securities, all three series of IGT bonds (7.5%, 5.5%, and 5.35%) that remain outstanding following the GTECH merger will be unconditionally guaranteed by Holdco on a pari passu basis (equal ranking).

SHELF REGISTRATION

In March 2012, we filed a shelf registration statement with the SEC which allows us to issue debt securities, in one or more series, from time to time in amounts, at prices and on terms determined at the time of offering. See Note 1 about limitations related to the proposed GTECH merger.