Long-term Debt Obligations



($ in millions)	Maturity Date	2018		2017
0.00% note (€300)	2019		$343		$358
2.3% notes	2019	299		299
3.6% notes	2020	498		497
9% non-callable debentures⁽¹⁾	2021	133		133
0.875% notes (€600)	2022	685		716
3.2% notes ($300)⁽²⁾	2023	298		—
0.875% note (€600)	2025	679		710
1.4% notes (€600)	2027	679		711
3.75% notes ($700)⁽³⁾	2028	694		—
2.5% note (€80)	2029	91		95
7.70% notes	2038	174		174
5.5% notes	2040	247		247
3% note (€120)	2044	131		137
Various other non-U.S. debt⁽⁴⁾	Various	39		43
Capital lease obligations	Various	12		15
Impact of derivatives on debt⁽¹⁾⁽⁵⁾	N/A	10		3
Total			$5,012		$4,138
Less payments due within one year	N/A	647		4
Long-term debt			$4,365		$4,134


(1)	PPG entered into several interest rate swaps, which were subsequently settled in prior periods. The impact of these settlements are being amortized over the remaining life of the debentures as a reduction to interest expense. The weighted average interest rate for these borrowings was 8.4% for the years ended December 31, 2018 and 2017.

(2)

In February 2018, PPG entered into interest rate swaps which converted $150 million of the notes from a fixed interest rate to a floating interest rate based on the three month London Interbank Offered Rate (LIBOR). The impact of the derivative on the notes represents the fair value adjustment of the debt. The average effective interest rate for the portion of the notes impacted by the swaps was 2.7% for the period ended December 31, 2018. Refer to Note 10, “Financial Instruments, Hedging Activities and Fair Value Measurements” for additional information.

(3)

In February 2018, PPG entered into interest rate swaps which converted $375 million of the notes from a fixed interest rate to a floating interest rate based on the three month LIBOR. The impact of the derivative on the notes represents the fair value adjustment of the debt. The average effective interest rate for the portion of the notes impacted by the swaps was 3.2% for the period ended December 31, 2018. Refer to Note 10, “Financial Instruments, Hedging Activities and Fair Value Measurements” for additional information.


(4)	Weighted average interest rate of 3.8% and 3.7% as of December 31, 2018 and 2017, respectively.


(5)	Fair value adjustment of the 3.2% $300 million notes and 3.75% $700 million notes as a result of fair value hedge accounting treatment related to the outstanding interest rate swaps as of December 31, 2018. Refer to Note 10, “Financial Instruments, Hedging Activities and Fair Value Measurements” for additional information.

2018 Activities

In February 2018, PPG completed a public offering of $300 million aggregate principal amount of 3.2% notes due 2023 and $700 million aggregate principal amount of 3.75% notes due 2028. 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 $992 million. A portion of the notes were converted from a fixed interest rate to a floating interest rate using interest rate swap contracts. For more information, refer to Note 10, “Financial Instruments, Hedging Activities and Fair Value Measurements.”

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 of cash on hand.

2016 Activities

In December 2016, PPG’s $125 million 6.65% notes, due 2018, were redeemed using $133 million of 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.

Credit agreements

In December 2015, PPG entered into a five-year credit agreement (the “Credit Agreement”) with several banks and financial institutions. 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, 2018 and 2017. The Credit Agreement also supports the Company’s commercial paper borrowings. There were no commercial paper borrowings outstanding as of December 31, 2018 and 2017.

Restrictive Covenants and Cross-Default Provisions

As of December 31, 2018, 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
2019		$647
2020	497
2021	131
2022	685
2023	298
Thereafter		$2,754

Short-term Debt Obligations



($ in millions)	2018		2017
Various, weighted average 3.4% and 1.9% as of December 31, 2018 and 2017, respectively.		$4		$8

Lease Obligations

Rental expense for operating leases was $289 million, $288 million and $273 million in 2018, 2017 and 2016, 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. As of January 1, 2019, PPG has adopted ASU 2016-02. See Note 1, “Summary of Significant Accounting Policies” for further information.

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, 2018
2019		$207
2020	157
2021	116
2022	93
2023	76
Beyond 2023		$244

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

PPG’s non-U.S. operations have uncommitted lines of credit totaling $401 million of which $3 million was used as of December 31, 2018. 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 $158 million and $163 million as of December 31, 2018 and 2017, 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, 2018 and 2017, guarantees outstanding were $14 million. 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 zero and $1 million at December 31, 2018 and 2017, respectively, and the fair values of these guarantees were $1 million at December 31, 2018 and 2017. 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.