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Borrowings and Lines of Credit

12 Months Ended

Dec. 31, 2019

Long-term Debt Obligations



($ in millions)	Maturity Date	2019		2018
0.00% note (€300)	2019		$—		$343
2.3% notes	2019	—		299
3.6% notes	2020	499		498
9% non-callable debentures⁽¹⁾	2021	134		133
0.875% notes (€600)	2022	671		685
3.2% notes ($300)⁽²⁾	2023	298		298
2.4% notes ($300)	2024	297		—
0.875% note (€600)	2025	665		679
1.4% notes (€600)	2027	665		679
3.75% notes ($700)⁽³⁾	2028	695		694
2.5% note (€80)	2029	88		91
2.8% notes ($300)	2029	297		—
7.70% notes	2038	174		174
5.5% notes	2040	247		247
3% note (€120)	2044	127		131
Commercial paper	Various	100		—
Various other non-U.S. debt⁽⁴⁾	Various	38		39
Finance lease obligations	Various	11		12
Impact of derivatives on debt⁽¹⁾⁽⁵⁾	N/A	36		10
Total			$5,042		$5,012
Less payments due within one year	N/A	503		647
Long-term debt			$4,539		$4,365


(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, 2019 and 2018.

(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 2.9% and 2.7% as of December 31, 2019 and 2018, respectively. 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 3.3% and 3.2% as of December 31, 2019 and 2018, respectively. Refer to Note 10, “Financial Instruments, Hedging Activities and Fair Value Measurements” for additional information.


(4)	Weighted average interest rate of 3.7% and 3.8% as of December 31, 2019 and 2018, 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, 2019 and 2018, respectively. Refer to Note 10, “Financial Instruments, Hedging Activities and Fair Value Measurements” for additional information.

2019 Activities

In August 2019, PPG completed a public offering of $300 million aggregate principal amount of 2.4% notes due 2024 and $300 million aggregate principal amount of 2.8% notes due 2029. 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 "2019 Indenture"). The 2019 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 the notes upon a Change of Control Triggering Event (as defined in the 2019 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 2019 Indenture. The aggregate cash proceeds from the notes, net of discounts and fees, was $595 million.

In November 2019, PPG’s €300 million 0.00% notes and $300 million 2.3% notes matured, upon which the Company paid $634 million to settle these obligations.

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 "2018 Indenture"). The 2018 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 the notes upon a Change of Control Triggering Event (as defined in the 2018 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 2018 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.

Credit agreements

In August 2019, PPG amended and restated its five-year credit agreement (the “Credit Agreement”) with several banks and financial institutions. The Credit Agreement amends and restates the Company's existing five year credit agreement dated as of December 18, 2015. The Credit Agreement provides for a $2.2 billion unsecured revolving credit facility. The Company has the ability to increase the size of the Credit Agreement by up to an additional $750 million, subject to the receipt of lender commitments and other conditions precedent. The Credit Agreement will terminate on August 30, 2024. 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. For the years ended December 31, 2019 and 2018, there were no amounts outstanding under the existing or prior credit agreement. The indicative borrowing rate on a one month, U.S. dollar denominated borrowing was 2.8% at December 31, 2019.

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 0.060% to 0.125% per annum.

The Credit Agreement also supports the Company’s commercial paper borrowings which are classified as long-term based on PPG’s intent and ability to refinance these borrowings on a long-term basis. Commercial paper borrowings of $100 million were outstanding as of December 31, 2019. There were no commercial paper borrowings outstanding as of December 31, 2018 under the prior credit agreement.

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 also requires the Company to maintain a ratio of Total Indebtedness to Total Capitalization, as defined in the Credit Agreement, of 60% or less; provided, that for any fiscal quarter in which the Company has made an acquisition for consideration in excess of $1 billion and for the next five fiscal quarters thereafter, the ratio of Total Indebtedness to Total Capitalization may not exceed 65% at any time. As of December 31, 2019, Total Indebtedness to Total Capitalization as defined under the Credit Agreement was 46%.

The Credit Agreement contains, among other things, customary events of default that would permit the lenders to accelerate the loans, 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.

Restrictive Covenants and Cross-Default Provisions

As of December 31, 2019, 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
2020		$503
2021		$166
2022		$669
2023		$302
2024		$396
Thereafter		$3,006

Short-term Debt Obligations



($ in millions)	2019		2018
Various, weighted average 3.6% and 3.4% as of December 31, 2019 and 2018, respectively.		$10		$4

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

PPG’s non-U.S. operations have uncommitted lines of credit totaling $396 million of which $2 million was used as of December 31, 2019. 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 $152 million and $158 million as of December 31, 2019 and 2018, 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, 2019 and 2018, guarantees outstanding were $9 million and $14 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 zero at December 31, 2019 and 2018, and the fair values of these guarantees were zero and $1 million at December 31, 2019 and 2018, respectively. 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.