Debt

6 Months Ended

Jan. 31, 2014

Short-term borrowings

Ferrellgas classified a portion of its secured credit facility borrowings as short-term because it was used to fund working capital needs that management had intended to pay down within the 12 month period following each balance sheet date. As of January 31, 2014 and July 31, 2013, $67.0 million and $50.1 million, respectively, were classified as short-term borrowings. For further discussion see the secured credit facility section below.

Long-term debt

Long-term debt consists of the following:



	January 31, 2014			July 31, 2013
Senior notes
Fixed rate, 6.50%, due 2021	$	500,000		$	500,000
Fixed rate, 6.75%, due 2022	325,000			—
Fixed rate, 9.125%, due 2017, net of unamortized discount of $2,556 at July 31, 2013	—			297,444
Fixed rate, 8.625%, due 2020	182,000			182,000
Fair value adjustments related to interest rate swaps	(3,197		)	(1,657		)

Secured credit facility
Variable interest rate, expiring October 2018 (net of $67.0 million and $50.1 million classified as short-term borrowings at January 31, 2014 and July 31, 2013, respectively)	140,455			121,346

Notes payable
9.0% and 9.1% weighted average interest rate at January 31, 2014 and July 31, 2013, respectively, due 2014 to 2022, net of unamortized discount of $2,176 and $2,392 at January 31, 2014 and July 31, 2013, respectively	9,836			10,898
	1,154,094			1,110,031
Less: current portion, included in other current liabilities on the condensed consolidated balance sheets	3,183			3,091
Long-term debt	$	1,150,911		$	1,106,940

Senior notes

During November 2013, Ferrellgas issued $325.0 million in aggregate principal amount of 6.75% senior notes due 2022 at an offering price equal to par. Ferrellgas received $319.3 million of net proceeds after deducting underwriters' fees. Ferrellgas used the net proceeds to redeem all of its $300.0 million 9.125% fixed rate senior notes due October 1, 2017. Ferrellgas used the remaining proceeds to pay the related $14.7 million make whole and consent payments, $3.3 million in interest payments and to reduce outstanding indebtedness under the secured credit facility. This redemption also resulted in $6.0 million of non-cash write-offs of unamortized debt discount and related capitalized debt costs. The make whole and consent payments and the non-cash write-offs of unamortized debt discount and related capitalized debt costs are classified as loss on extinguishment of debt.

As a result of the above transactions, the scheduled annual principal payments on long-term debt have been updated as follows:



For the fiscal year ending July 31,	Scheduled annual principal payments
2014	$	795
2015	3,053
2016	2,997
2017	2,676
2018	1,074
Thereafter	1,148,872
Total	$	1,159,467

Secured credit facility

During October 2013, Ferrellgas executed an amendment to its secured credit facility. This amendment extended the maturity date to October 2018 and increased the size of the facility from $400.0 million to $500.0 million with no change to the size of the letter of credit sublimit which remains at $200.0 million. Ferrellgas incurred a loss on extinguishment of debt of $0.3 million related to the writeoff of capitalized financing costs. Borrowings on the amended secured credit facility bear interest, at our option, at a rate equal to either:


•	for Base Rate Loans or Swing Line Loans, the Base Rate, which is defined as the higher of i) the federal funds rate plus 0.50%, ii) Bank of America’s prime rate; or iii) the Eurodollar Rate plus 1.00%; plus a margin varying from 0.75% to 1.75%; or


•	for Eurodollar Rate Loans, the Eurodollar Rate, which is defined as the LIBOR Rate plus a margin varying from 1.75% to 2.75%.

As of January 31, 2014, Ferrellgas had total borrowings outstanding under its secured credit facility of $207.5 million, of which $140.5 million was classified as long-term debt. As of July 31, 2013, Ferrellgas had total borrowings outstanding under its secured credit facility of $171.4 million, of which $121.3 million was classified as long-term debt. Additionally, Ferrellgas had $232.2 million and $177.9 million of available borrowing capacity under our secured credit facility as of January 31, 2014 and January 31, 2013, respectively.

Borrowings outstanding at January 31, 2014 and July 31, 2013 under the secured credit facilities had weighted average interest rates of 3.4% and 3.7%, respectively.

The obligations under the credit facility are secured by substantially all assets of the operating partnership, the general partner and certain subsidiaries of the operating partnership but specifically excluding (a) assets that are subject to the operating partnership’s accounts receivable securitization facility, (b) the general partner’s equity interest in Ferrellgas Partners and (c) equity interest in certain unrestricted subsidiaries. Such obligations are also guaranteed by the general partner and certain subsidiaries of the operating partnership.

Letters of credit outstanding at January 31, 2014 totaled $60.3 million and were used primarily to secure insurance arrangements and, to a lesser extent, product purchases. Letters of credit outstanding at July 31, 2013 totaled $53.9 million and were used primarily to secure insurance arrangements and, to a lesser extent, commodity hedges and product purchases. At January 31, 2014, Ferrellgas had remaining letter of credit capacity of $139.7 million. At July 31, 2013, Ferrellgas had remaining letter of credit capacity of $146.1 million.

Interest rate swaps

During May 2012, the operating partnership entered into a $140.0 million interest rate swap agreement to hedge against changes in the fair value of a portion of its $300.0 million 9.125% fixed rate senior notes due 2017. The operating partnership received 9.125% and paid one-month LIBOR plus 7.96% on the $140.0 million swapped. The operating partnership accounted for this agreement as a fair value hedge. In October 2013, this interest rate swap was terminated. As a result, the operating partnership discontinued hedge accounting treatment for this agreement at a cost of $0.2 million, which was classified as loss on extinguishment of debt when the related senior notes were redeemed as discussed above.

Ferrellgas, L.P. [Member]

Debt

Short-term borrowings

Ferrellgas, L.P. classified a portion of its secured credit facility borrowings as short-term because it was used to fund working capital needs that management had intended to pay down within the 12 month period following each balance sheet date. As of January 31, 2014 and July 31, 2013, $67.0 million and $50.1 million, respectively, were classified as short-term borrowings. For further discussion see the secured credit facility section below.

Long-term debt

Long-term debt consists of the following:



	January 31, 2014			July 31, 2013
Senior notes
Fixed rate, 6.50%, due 2021	$	500,000		$	500,000
Fixed rate, 6.75%, due 2022	325,000			—
Fixed rate, 9.125%, due 2017, net of unamortized discount of $2,556 at July 31, 2013	—			297,444
Fair value adjustments related to interest rate swaps	(3,197		)	(1,657		)

Secured credit facility
Variable interest rate, expiring October 2018 (net of $67.0 million and $50.1 million classified as short-term borrowings at January 31, 2014 and July 31, 2013, respectively)	140,455			121,346

Notes payable
9.0% and 9.1% weighted average interest rate at January 31, 2014 and July 31, 2013, respectively, due 2014 to 2022, net of unamortized discount of $2,176 and $2,392 at January 31, 2014 and July 31, 2013, respectively	9,836			10,898
	972,094			928,031
Less: current portion, included in other current liabilities on the condensed consolidated balance sheets	3,183			3,091
Long-term debt	$	968,911		$	924,940

Senior Notes

During November 2013, Ferrellgas, L.P. issued $325.0 million in aggregate principal amount of 6.75% senior notes due 2022 at an offering price equal to par. Ferrellgas, L.P. received $319.3 million of net proceeds after deducting underwriters' fees. Ferrellgas, L.P. used the net proceeds to redeem all of its $300.0 million 9.125% fixed rate senior notes due October 1, 2017. Ferrellgas, L.P. used the remaining proceeds to pay the related $14.7 million make whole and consent payments, $3.3 million in interest payments and to reduce outstanding indebtedness under the secured credit facility. This redemption also resulted in $6.0 million of non-cash write-offs of unamortized debt discount and related capitalized debt costs. The make whole and consent payments and the non-cash write-offs of unamortized debt discount and related capitalized debt costs are classified as loss on extinguishment of debt.

As a result of the above transactions, the scheduled annual principal payments on long-term debt have been updated as follows:



For the fiscal year ending July 31,	Scheduled annual principal payments
2014	$	795
2015	3,053
2016	2,997
2017	2,676
2018	1,074
Thereafter	966,872
Total	$	977,467

Secured credit facility

During October 2013, Ferrellgas, L.P. executed an amendment to its secured credit facility. This amendment extended the maturity date to October 2018 and increased the size of the facility from $400.0 million to $500.0 million with no change to the size of the letter of credit sublimit which remains at $200.0 million. Ferrellgas, L.P. incurred a loss on extinguishment of debt of $0.3 million related to the writeoff of capitalized financing costs. Borrowings on the amended secured credit facility bear interest, at our option, at a rate equal to either:


•	for Base Rate Loans or Swing Line Loans, the Base Rate, which is defined as the higher of i) the federal funds rate plus 0.50%, ii) Bank of America’s prime rate; or iii) the Eurodollar Rate plus 1.00%; plus a margin varying from 0.75% to 1.75%; or


•	for Eurodollar Rate Loans, the Eurodollar Rate, which is defined as the LIBOR Rate plus a margin varying from 1.75% to 2.75%.

As of January 31, 2014, Ferrellgas, L.P. had total borrowings outstanding under its secured credit facility of $207.5 million, of which $140.5 million was classified as long-term debt. As of July 31, 2013, Ferrellgas, L.P. had total borrowings outstanding under its secured credit facility of $171.4 million, of which $121.3 million was classified as long-term debt. Additionally, Ferrellgas had $232.2 million and $177.9 million of available borrowing capacity under our secured credit facility as of January 31, 2014 and January 31, 2013, respectively.

Borrowings outstanding at January 31, 2014 and July 31, 2013 under the secured credit facilities had weighted average interest rates of 3.4% and 3.7%, respectively.

The obligations under this credit facility are secured by substantially all assets of Ferrellgas, L.P., the general partner and certain subsidiaries of Ferrellgas, L.P. but specifically excluding (a) assets that are subject to Ferrellgas, L.P.’s accounts receivable securitization facility, (b) the general partner’s equity interest in Ferrellgas Partners and (c) equity interest in certain unrestricted subsidiaries. Such obligations are also guaranteed by the general partner and certain subsidiaries of Ferrellgas, L.P.

Letters of credit outstanding at January 31, 2014 totaled $60.3 million and were used primarily to secure insurance arrangements and to a lesser extent, product purchases. Letters of credit outstanding at July 31, 2013 totaled $53.9 million and were used primarily to secure insurance arrangements and to a lesser extent, commodity hedges and product purchases. At January 31, 2014, Ferrellgas, L.P. had remaining letter of credit capacity of $139.7 million. At July 31, 2013 Ferrellgas, L.P. had remaining letter of credit capacity of $146.1 million.

Interest rate swaps

During May 2012, Ferrellgas, L.P. entered into a $140.0 million interest rate swap agreement to hedge against changes in the fair value of a portion of its $300.0 million 9.125% fixed rate senior notes due 2017. Ferrellgas, L.P. received 9.125% and paid one-month LIBOR plus 7.96% on the $140.0 million swapped. Ferrellgas, L.P. accounted for this agreement as a fair value hedge. In October 2013, this interest rate swap was terminated. As a result, Ferrellgas, L.P. discontinued hedge accounting treatment for this agreement at a cost of $0.2 million, which was classified as loss on extinguishment of debt when the related senior notes were redeemed as discussed above.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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