Borrowings and Lines of Credit

Long-term Debt Obligations



($ in millions)	Maturity Date	2017		2016
3-year variable rate bank loan (€500)	2017		$—		$526
0.00% note (€300)	2019	358		313
2.3% notes	2019	299		298
3.6% notes	2020	497		496
9% non-callable debentures⁽¹⁾	2021	133		133
0.875% notes (€600)	2022	716		626
0.875% note (€600)	2025	710		621
1.4% notes (€600)	2027	711		620
2.5% note (€80)	2029	95		83
7.70% notes	2038	174		174
5.5% notes	2040	247		247
3% note (€120)	2044	137		118
Various other non-U.S. debt⁽²⁾	Various	43		41
Capital lease obligations	Various	15		18
Impact of derivatives on debt⁽¹⁾	N/A	3		3
Total			$4,138		$4,317
Less payments due within one year	N/A	4		530
Long-term debt			$4,134		$3,787

(1)

PPG entered into several interest rate swaps which had the effect of converting fixed rate notes to variable rates, based on the three-month London Interbank Offered Rate (LIBOR). There were no interest rate swaps outstanding related to these instruments as of December 31, 2017 and 2016. The impact of the derivatives on debt represents the fair value adjustment of the debt while the interest rate swaps were outstanding, which is being amortized as a reduction to interest expense over the remaining term of the debt. The weighted average effective interest rate for these borrowings, including the effects of the swaps, was 8.4% and 8.4% for the years ended December 31, 2017 and 2016, respectively. Refer to Note 10, “Financial Instruments, Hedging Activities, and Fair Value Measurements” for additional information.


(2)	Weighted average interest rate of 3.7% and 3.8% as of December 31, 2017 and 2016, respectively.

2017 Activities

In November 2017, PPG’s €500 million 3-year variable rate bank loan matured and the Company repaid this obligation using $587 million cash on hand.

2016 Activities

In December 2016, PPG’s $125 million 6.65% notes, due 2018, were redeemed using $133 million cash on hand. Also, the Company prepaid its $250 million Term Loan Credit Agreements, one with the Bank of Tokyo-Mitsubishi UFJ, Ltd. and the other with BNP Paribas, which PPG entered into during May 2016. The Bank of Tokyo-Mitsubishi UFJ, Ltd. Term Loan would have originally terminated and all amounts outstanding would have been payable in March 2017. The BNP Paribas Term Loan would have originally terminated and all amounts outstanding would have been payable in May 2017.

In November 2016, PPG completed a public offering of €300 million 0.000% Notes due 2019 and €600 million 0.875% Notes due 2025. These notes were issued pursuant to PPG’s existing shelf registration statement and pursuant to an indenture between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee, as supplemented. The Indenture governing these notes contains covenants that limit the Company’s ability to, among other things, incur certain liens securing indebtedness, engage in certain sale-leaseback transactions, and enter into certain consolidations, mergers, conveyances, transfers or leases of all or substantially all the Company’s assets. The terms of these notes also require the Company to make an offer to repurchase Notes upon a Change of Control Triggering Event (as defined in the Indenture) at a price equal to 101% of their principal amount plus accrued and unpaid interest. The Company may issue additional debt from time to time pursuant to the Indenture.

The aggregate cash proceeds from the notes, net of discounts and fees, was $987 million. The notes are denominated in euro and have been designated as hedges of net investments in the Company’s European operations. For more information, refer to Note 10 “Financial Instruments, Hedging Activities and Fair Value Measurements.”

In January 2016, PPG’s $250 million 1.9% notes matured, and the Company repaid these obligations using cash on hand.

2015 Activities

In December 2015, PPG entered into a five-year credit agreement (the “Credit Agreement”) with several banks and financial institutions. The Credit Agreement replaced the Company's Five Year Credit Agreement dated as of September 12, 2012. The Credit Agreement provides for a $1.8 billion unsecured revolving credit facility. The Company has the ability to increase the size of the Credit Agreement by up to an additional $500 million, subject to the receipt of lender commitments and other conditions. The Credit Agreement will terminate on December 18, 2020. The Company has the right, subject to certain conditions set forth in the Credit Agreement, to designate certain subsidiaries of the Company as borrowers under the Credit Agreement. In connection with any such designation, the Company is required to guarantee the obligations of any such subsidiaries under the Credit Agreement. There were no amounts outstanding under the Credit Agreement during the years ended December 31, 2017 and 2016. The available borrowing rate on a one month, U.S. dollar denominated borrowing was 2.56% at December 31, 2017.

Borrowings under the Credit Agreement may be made in U.S. dollars or in euros. The Credit Agreement provides that loans will bear interest at rates based, at the Company’s option, on one of two specified base rates plus a margin based on certain formulas defined in the Credit Agreement. Additionally, the Credit Agreement contains a Commitment Fee, as defined in the Credit Agreement, on the amount of unused commitments under the Credit Agreement ranging from 0.080% to 0.225% per annum. The average Commitment Fee in 2017 was 0.09%, and PPG is committed to pay 0.09% in 2018.

The Credit Agreement also supports the Company’s commercial paper borrowings. There were no commercial paper borrowings outstanding as of December 31, 2017 and 2016.

The Credit Agreement contains usual and customary restrictive covenants for facilities of its type, which include, with specified exceptions, limitations on the Company’s ability to create liens or other encumbrances, to enter into sale and leaseback transactions and to enter into consolidations, mergers or transfers of all or substantially all of its assets. The Credit Agreement maintains the same restrictive covenant as the prior credit agreement whereby the Company must maintain a ratio of Total Indebtedness to Total Capitalization, as defined in the Credit Agreement, of 60% or less. As of December 31, 2017, total indebtedness was 41% of the Company’s total capitalization.

The Credit Agreement also contains customary events of default, including the failure to make timely payments when due under the Credit Agreement or other material indebtedness, the failure to satisfy covenants contained in the Credit Agreement, a change in control of the Company and specified events of bankruptcy and insolvency that would permit the lenders to accelerate the repayment of any loans.

In June 2015, PPG’s €300 million 3.875% notes matured and the Company repaid these obligations using $336 million of cash on hand.

In March 2015, PPG completed a public offering of €600 million 0.875% notes due 2022 and €600 million 1.400% Notes due 2027, or €1.2 billion ($1.26 billion) in aggregate principal amount. These notes were issued pursuant to PPG’s existing shelf registration statement and pursuant to an indenture between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee, as supplemented. The Indenture governing these notes contains covenants that limit the Company’s ability to, among other things, incur certain liens securing indebtedness, engage in certain sale-leaseback transactions, and enter into certain consolidations, mergers, conveyances, transfers or leases of all or substantially all the Company’s assets. The terms of these notes also require the Company to make an offer to repurchase notes upon a Change of Control Triggering Event (as defined in the Indenture) at a price equal to 101% of their principal amount plus accrued and unpaid interest. The Company may issue additional debt from time to time pursuant to the Indenture.

The aggregate cash proceeds from the notes, net of discounts and fees, was $1.24 billion. The notes are denominated in euro and have been designated as hedges of net investments in the Company’s European operations. For more information, refer to Note 10 “Financial Instruments, Hedging Activities and Fair Value Measurements.”

Restrictive Covenants and Cross-Default Provisions

As of December 31, 2017, PPG was in full compliance with the restrictive covenants under its various credit agreements, loan agreements and indentures.

Additionally, the Company’s Credit Agreement contains customary cross-default provisions. These provisions provide that a default on a debt service payment of $50 million or more for longer than the grace period provided under another agreement may result in an event of default under this agreement. The Company’s 9% non-callable debentures also contain a customary cross default provision triggered by the Company’s default on a debt service payment of $10 million or more. None of the Company’s primary debt obligations are secured or guaranteed by the Company’s affiliates.

Long-term Debt Maturities



($ in millions)	Maturity per year
2018		$4
2019	659
2020	497
2021	133
2022	718
Thereafter		$2,127

Short-term Debt Obligations



($ in millions)	2017	2016
Various, weighted average 1.9% and 5.8% as of December 31, 2017 and 2016, respectively.	$8	$99

Lease Obligations

Rental expense for operating leases was $288 million, $273 million and $260 million in 2017, 2016 and 2015, respectively. The primary leased assets include paint stores, transportation equipment, warehouses and other distribution facilities, and office space, including the Company’s corporate headquarters located in Pittsburgh, Pa.

Minimum lease commitments for operating leases that have initial or remaining lease terms in excess of one year are as follows:



($ in millions)	As of December 31, 2017
2018		$212
2019	167
2020	138
2021	86
2022	63
Beyond 2022		$174

Lines of Credit, Letters of Credit, Surety Bonds and Guarantees

PPG’s non-U.S. operations have uncommitted lines of credit totaling $589 million of which $2 million was used as of December 31, 2017. These uncommitted lines of credit are subject to cancellation at any time and are generally not subject to any commitment fees.

The Company had outstanding letters of credit and surety bonds of $163 million and $160 million as of December 31, 2017 and 2016, respectively. The letters of credit secure the Company’s performance to third parties under certain self-insurance programs and other commitments made in the ordinary course of business.

As of December 31, 2017 and 2016, guarantees outstanding were $14 million and $12 million, respectively. The guarantees relate primarily to debt of certain entities in which PPG has an ownership interest and selected customers of certain PPG businesses. A portion of such debt is secured by the assets of the related entities. The carrying value of these guarantees were $1 million at December 31, 2017 and 2016 and the fair values of these guarantees were $1 million at December 31, 2017 and 2016. The fair value of each guarantee was estimated by comparing the net present value of two hypothetical cash flow streams, one based on PPG’s incremental borrowing rate and the other based on the borrower’s incremental borrowing rate, as of the effective date of the guarantee. Both streams were discounted at a risk free rate of return. The Company does not believe any loss related to these letters of credit, surety bonds or guarantees is likely.