(10) DEBT

The components of debt as of March 31, 2016 and December 31, 2015 consisted of the following:



		March 31, 2016
		(in millions)
	Debt Instrument		Unamortized Issuance Cost		Unamortized Debt Discount		Total
Short-term debt:
7.15% Senior Notes due May 2018	$	1	$	–	$	–	$	1
Total short-term debt	$	1	$	–	$	–	$	1

Long-term debt:
Variable rate (4.154% at March 31, 2016) credit facility, expires December 2018		1,852		–		–		1,852
Variable rate (2.025% at March 31, 2016) term loan facility, due November 2018		750		(2)		–		748
7.35% Senior Notes due October 2017		15		–		–		15
7.125% Senior Notes due October 2017		25		–		–		25
3.3% Senior Notes due January 2018		350		(2)		–		348
7.5% Senior Notes due February 2018		600		(2)		–		598
7.15% Senior Notes due May 2018		26		–		–		26
4.05% Senior Notes due January 2020		850		(5)		–		845
4.10% Senior Notes due March 2022		1,000		(5)		(1)		994
4.95% Senior Notes due January 2025		1,000		(7)		(2)		991
Total long-term debt	$	6,468	$	(23)	$	(3)	$	6,442

Total debt	$	6,469	$	(23)	$	(3)	$	6,443



		December 31, 2015
		(in millions)
	Debt Instrument		Unamortized Issuance Cost		Unamortized Debt Discount		Total
Short-term debt:
7.15% Senior Notes due May 2018	$	1	$	–	$	–	$	1
Total short-term debt	$	1	$	–	$	–	$	1

Long-term debt:
Variable rate (1.886% at December 31, 2015) credit facility, expires December 2018		116		–		–		116
Variable rate (1.775% at December 31, 2015) term loan facility, due November 2018		750		(3)		–		747
7.35% Senior Notes due October 2017		15		–		–		15
7.125% Senior Notes due October 2017		25		–		–		25
3.3% Senior Notes due January 2018		350		(2)		–		348
7.5% Senior Notes due February 2018		600		(2)		–		598
7.15% Senior Notes due May 2018		26		–		–		26
4.05% Senior Notes due January 2020		850		(5)		(1)		844
4.10% Senior Notes due March 2022		1,000		(5)		(1)		994
4.95% Senior Notes due January 2025		1,000		(7)		(2)		991
Total long-term debt	$	4,732	$	(24)	$	(4)	$	4,704

Total debt	$	4,733	$	(24)	$	(4)	$	4,705

Credit Facility

The Company’s revolving credit facility entered into in December 2013, provides a borrowing capacity of up to $2.0 billion, reduced for any outstanding letters of credit, and matures in December 2018, with options for two one-year extensions with participating lender approval. The Company had $148 million of letters of credit outstanding as of March 31, 2016. The borrowing capacity available under the revolving credit facility may be increased by $500 million upon the Company’s agreement with its participating lenders. The interest rate on the revolving credit facility is calculated based upon the Company’s public debt ratings from Standard & Poor’s (“S&P”) and Moody’s Investors Service (“Moody’s”) and was 200.0 basis points over LIBOR as of March 31, 2016. Since the adjustment ceiling per the terms of the revolving credit facility is 200.0 basis points, the interest rate sensitivity on the Company’s revolving credit facility currently correlates directly to changes in LIBOR. On March 30, 2016, the Company borrowed $1.55 billion on the revolving credit facility. On April 1, 2016, the Company repaid the $1.55 billion borrowing in full. As of March 31, 2016, the Company had $1.9 billion drawn on the credit facility and $0.1 billion in letters of credit.

The revolving credit facility and the term loan facility are unsecured and are not guaranteed by any subsidiaries of the Company. The revolving credit facility and the term loan facility contain covenants imposing certain restrictions on the Company, including a financial covenant under which Southwestern may not issue total debt in excess of 60% of its total adjusted book capital. This financial covenant with respect to capitalization percentages excludes the effects of any full cost ceiling impairments, certain hedging activities, unamortized issuance cost, unamortized debt discount and the Company’s pension and other postretirement liabilities. As of March 31, 2016, the Company’s adjusted capital structure was 45% debt and 55% equity and was in compliance with the covenants of its revolving credit facility, term loan facility and other debt agreements.

Term Facility

In November 2015, the Company entered into a $750 million unsecured three-year term loan credit agreement with various tenders that was utilized to repay borrowings under the revolving credit facility. The interest rate on the term loan facility is determined based upon the Company’s public debt ratings from S&P and Moody’s and was 162.5 basis points over the London Interbank Offered Rate (“LIBOR”) as of March 31, 2016. The term loan facility requires prepayment under certain circumstances from the net cash proceeds of sales of equity or certain assets and borrowings outside the ordinary course of business.

Public Offering of Senior Notes

In January 2015, the Company completed a public offering of $350 million aggregate principal amount of its 3.30% senior notes due 2018 (the “2018 Notes”), $850 million aggregate principal amount of its 4.05% senior notes due 2020 (the “2020 Notes”) and $1 billion aggregate principal amount of its 4.95% senior notes due 2025 (the “2025 Notes” together with the 2018 and 2020 Notes, the “Notes”), with net proceeds from the offering totaling approximately $2.2 billion after underwriting discounts and offering expenses. The proceeds from this offering were used to repay the remaining principal and interest outstanding under the Company’s $4.5 billion 364-day bridge term loan facility, which was first reduced with proceeds from the Company’s concurrent underwritten public offerings of common and preferred stock, and were also used to repay a portion of amounts outstanding under the Company’s revolving credit facility. As a result of this repayment, the Company expensed $47 million of short-term unamortized debt issuance costs related to the bridge facility in January 2015 recognized in other interest charges on the unaudited condensed consolidated statement of operations for the three months ended March 31, 2015. The Notes were sold to the public at a price of 99.949% of their face value for the 2018 Notes, 99.897% of their face value for the 2020 Notes and 99.782% of their face value for the 2025 Notes. The interest rates on the Notes is determined based upon the Company’s public debt ratings from S&P and Moody’s. Downgrades from either rating agency increase interest costs by 25.0 basis points per downgrade level on the following semi-annual bond interest payment. In February 2016, S&P and Moody’s downgraded the Company’s credit ratings, increasing the interest rates on these notes by 125.0 basis points effective July 2016. As a result of the downgrade, the Company’s interest expense for 2016 will increase $14 million. The first higher interest rate coupon payment to bondholders will be paid in January 2017.

Commercial Paper

In April 2015, the Company entered into a commercial paper program which allowed it to issue up to $2.0 billion in commercial paper provided that borrowings from its commercial paper program combined with outstanding borrowings under its revolving credit facility, not exceed $2.0 billion. The commercial paper issuance had terms of up to 397 days and carried interest at rates agreed upon at the time of each issuance. As of March 31, 2016, the Company had no outstanding issuances under its commercial paper program and had no plans of utilizing the commercial paper market for the remainder of 2016.