ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾

7. DEBT

ÌýÌýÌýÌýÌýÌýÌýÌýOutstanding debt consisted of the following (dollars in millions):

ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ Corporation

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ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ International

DIRECT AND SUBSIDIARY DEBT

ÌýÌýÌýÌýÌýÌýÌýÌýÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ Corporation's direct debt and guarantee obligations consist of the following: guarantees of certain debt of HPS (our Chinese MDI joint venture); a guarantee of certain obligations of Arabian Amines Company (our consolidated ethyleneamines manufacturing joint venture in Jubail, Saudi Arabia); a guarantee of certain debt and other obligations of certain of our Australian subsidiaries; and certain indebtedness incurred from time to time to finance certain insurance premiums.

ÌýÌýÌýÌýÌýÌýÌýÌýSubstantially all of our other debt, including the facilities described below, has been incurred by our subsidiaries (primarily ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ International); such subsidiary debt is nonrecourse to us and we have no contractual obligation to fund our subsidiaries' respective operations.

Senior Credit Facilities

ÌýÌýÌýÌýÌýÌýÌýÌýAs of JuneÌý30, 2011, our senior secured credit facilities ("Senior Credit Facilities") consisted of our revolving facility ("Revolving Facility"), our term loan B facility ("Term Loan B"), our term C loan facility ("Term Loan C") and our extended term loan B facility ("Extended Term Loan B") as follows (dollars in millions):

(1)

We had no borrowings outstanding under our Revolving Facility; we had approximately $26Ìýmillion (U.S. dollar equivalents) of letters of credit and bank guarantees issued and outstanding under our Revolving Facility.

(2)

The Revolving Facility matures in March 2014, but is subject to optional extensions from time to time with the consent of the lenders and subject to certain specified conditions and exceptions. Notwithstanding the stated maturity dates, the maturities of the Revolving Facility and Term LoanÌýB will accelerate if we do not repay, or refinance, all but $100Ìýmillion of ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ International's outstanding debt securities on or before three months prior to the maturity dates of such debt securities. The maturity of the Extended Term Loan B will also accelerate if we do not repay, refinance or have a minimum level of liquidity available to enable us to refinance or repay our outstanding 5.50% senior notes due 2016 at least three months prior to the maturity date of such notes.

ÌýÌýÌýÌýÌýÌýÌýÌýOur obligations under the Senior Credit Facilities are guaranteed by our guarantor subsidiaries, which consist of substantially all of our domestic subsidiaries and certain of our foreign subsidiaries, and are secured by a first priority lien on substantially all of our domestic property, plant and equipment, the stock of all of our material domestic subsidiaries and certain foreign subsidiaries and pledges of intercompany notes between certain of our subsidiaries.

Amendments to Senior Credit Facilities

ÌýÌýÌýÌýÌýÌýÌýÌýOn MarchÌý7, 2011, ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ International entered into a sixth amendment to its credit agreement. The amendment, among other things, extended $650Ìýmillion of aggregate principal of Term Loan B to a stated maturity of April 2017. As noted in the table above, after the amendment, as of JuneÌý30, 2011, we have $652Ìýmillion outstanding on Term Loan B with maturity of April 2014 and $650Ìýmillion outstanding on Extended Term Loan B with a maturity of April 2017. The amendment increased the interest rate margin with respect to Extended Term Loan B by 1.0%.

ÌýÌýÌýÌýÌýÌýÌýÌýExtended Term Loan B will amortize in an amount equal to 1.0% of the principal amount, payable annually commencing on MarchÌý31, 2012. The amendment also grants ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ International the right to request an extension of the remaining principal balance of Term Loan B to the stated maturity date of Extended Term Loan B.

A/R Programs

ÌýÌýÌýÌýÌýÌýÌýÌýOur U.S. and European accounts receivable programs ("U.S. A/R Program," "EU A/R Program" and collectively "A/R Programs") are structured so that we grant a participating undivided interest in certain of our trade receivables to a U.S. special purpose entity ("U.S. SPE") and a European special purpose entity ("EU SPE"). We retain the servicing rights and a retained interest in the securitized receivables. Information regarding the A/R Programs as of JuneÌý30, 2011 is as follows (monetary amounts in millions):

ÌýÌýÌýÌýÌýÌýÌýÌýAs of JuneÌý30, 2011, $698Ìýmillion of accounts receivable were pledged as collateral under the A/R Programs.

Amendments to A/R Programs

ÌýÌýÌýÌýÌýÌýÌýÌýOn AprilÌý15, 2011, ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ International entered into an amendment to the EU A/R Program. This amendment, among other things, extended the scheduled commitment termination date of the program to April 2014, added an additional lender to the program and reduced the applicable margin on borrowings to 2.0%.

ÌýÌýÌýÌýÌýÌýÌýÌýOn AprilÌý18, 2011, ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ International entered into an amendment to the U.S. A/R Program. This amendment, among other things, extended the scheduled commitment termination date of the program to April 2014, added an additional lender to the program and reduced the applicable margin on borrowings to a range of 1.50% to 1.65%.

Redemption of Notes and Loss on Early Extinguishment of Debt

ÌýÌýÌýÌýÌýÌýÌýÌýDuring the six months ended JuneÌý30, 2011 and 2010, we redeemed or repurchased the following notes (monetary amounts in millions):

ÌýÌýÌýÌýÌýÌýÌýÌýFor the six months ended JuneÌý30, 2011, we and ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ International recorded a loss on early extinguishment of debt of $3Ìýmillion. For the six months ended JuneÌý30, 2010, we had a loss on early extinguishment of $162Ìýmillion, which included $7Ìýmillion of loss on early extinguishment of debt on the prepayment of our term loans, and ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ International recorded a loss on early extinguishment of debt of $16Ìýmillion, which included the $7Ìýmillion of loss on early extinguishment of debt on the prepayment of our term loans.

ÌýÌýÌýÌýÌýÌýÌýÌýOn JulyÌý25, 2011, ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ International redeemed the remaining $75Ìýmillion of its 7.375% senior subordinated notes due 2015. This amount was classified as current on the accompanying condensed consolidated balance sheets (unaudited) as of JuneÌý30, 2011. The total redemption payment, excluding accrued interest, was $77Ìýmillion, which included $2Ìýmillion of call premiums. We expect to record a loss on early extinguishment of debt for this transaction in the third quarter of 2011 of $2Ìýmillion.

Variable Interest Entity Debt

ÌýÌýÌýÌýÌýÌýÌýÌýOn AprilÌý1, 2011 we began consolidating Sasol-ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ which was previously accounted for under the equity method. See "NoteÌý5. Variable Interest Entities." Sasol-ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ has a facility agreement for a €77Ìýmillion term loan facility (approximately $111Ìýmillion) and a €5Ìýmillion revolving facility (approximately $7Ìýmillion). As of JuneÌý30, 2011, Sasol-ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ had no borrowings under the revolving facility and had €76Ìýmillion (approximately $109Ìýmillion) outstanding under the term loan facility.

ÌýÌýÌýÌýÌýÌýÌýÌýThe facility will be repaid over 15 semiannual installments, beginning December 2011, with final repayment scheduled for December 2018. Obligations under the facility agreement are secured by, among other things, first priority right on the property, plant and equipment of Sasol-ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾.

ÌýÌýÌýÌýÌýÌýÌýÌýAs of JuneÌý30, 2011, Arabian Amines Company had $204Ìýmillion outstanding under its loan commitments and debt financing arrangements.

Other Debt

ÌýÌýÌýÌýÌýÌýÌýÌýDuring the six months ended JuneÌý30, 2011, HPS repaid $2Ìýmillion and RMB 118Ìýmillion (approximately $18Ìýmillion) of term loans and working capital loans under its secured facilities. In addition, during the six months ended JuneÌý30, 2011, HPS refinanced RMB 38Ìýmillion (approximately $6Ìýmillion) in working capital loans due beginning in 2011 to 2014. The interest rate on these facilities is LIBOR plus 0.48% for U.S. dollar borrowings and 90% of the Peoples Bank of China rate for RMB borrowings. As of JuneÌý30, 2011, HPS had $14Ìýmillion in U.S. dollar borrowings and 362Ìýmillion in RMB term loan and working capital borrowings (approximately $56Ìýmillion) under these secured facilities.

ÌýÌýÌýÌýÌýÌýÌýÌýAs of JuneÌý30, 2011, HPS also had RMB 499Ìýmillion (approximately $77Ìýmillion) outstanding under a loan facility for issuing working capital loans and for discounting commercial drafts with recourse.

ÌýÌýÌýÌýÌýÌýÌýÌýAs of JuneÌý30, 2011, our Australian subsidiary has AUD32Ìýmillion (approximately $34Ìýmillion) outstanding under our Australian credit facility. The credit facility is comprised of a revolving facility with AUD17Ìýmillion outstanding (approximately $19Ìýmillion) and a term facility with AUD14Ìýmillion outstanding (approximately $15Ìýmillion). Our Australian subsidiary is currently not in compliance with a financial covenant contained in the credit facility. Our lender has agreed to modify certain terms of the credit facility, and we expect to complete this amendment in the third quarter of 2011. The amounts outstanding under our Australian credit facility were classified as current on the accompanying condensed consolidated balance sheets (unaudited) as of JuneÌý30, 2011.

Note Payable from ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ International to ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ Corporation

ÌýÌýÌýÌýÌýÌýÌýÌýAs of JuneÌý30, 2011, we have a loan of $535Ìýmillion to our subsidiary, ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ International (the "Intercompany Note"). The Intercompany Note is unsecured and $100Ìýmillion of the outstanding amount is classified as current as of JuneÌý30, 2011 and DecemberÌý31, 2010, respectively, on the accompanying consolidated balance sheets. As of JuneÌý30, 2011, under the terms of the Intercompany Note, ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ International promises to pay us interest on the unpaid principal amount at a rate per annum based on the previous monthly average borrowing rate obtained under our U.S. A/R Programs, less ten basis points (provided that the rate shall not exceed an amount that is 25 basis points less than the monthly average borrowing rate obtained for the U.S. LIBOR-based borrowings under our Revolving Facility).

COMPLIANCE WITH COVENANTS

ÌýÌýÌýÌýÌýÌýÌýÌýWe believe that we are in compliance with the covenants contained in the agreements governing our material debt instruments, including our Senior Credit Facilities, our A/R Programs and our notes. However, our Australian subsidiary is currently not in compliance with a financial covenant contained in its credit facility. See "—Other Debt" above.

ÌýÌýÌýÌýÌýÌýÌýÌýOur Senior Credit Facilities are subject to a single financial covenant (the "Leverage Covenant") which applies only to the Revolving Facility and is tested at the ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ International level. The Leverage Covenant is applicable only if borrowings, letters of credit or guarantees are outstanding under the Revolving Facility (cash collateralized letters of credit or guarantees are not deemed outstanding). The Leverage Covenant is a net senior secured leverage ratio covenant which requires that ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ International's ratio of senior secured debt to EBITDA (as defined in the applicable agreement) is not more than 3.75 to 1.

ÌýÌýÌýÌýÌýÌýÌýÌýIf in the future ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ International failed to comply with the Leverage Covenant, then we may not have access to liquidity under our Revolving Facility. If ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ International failed to comply with the Leverage Covenant at a time when we had uncollateralized loans or letters of credit outstanding under the Revolving Facility, ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ International would be in default under the Senior Credit Facilities, and, unless ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ International obtained a waiver or forbearance with respect to such default (as to which we can provide no assurance), ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ International could be required to pay off the balance of the Senior Credit Facilities in full, and we may not have further access to such facilities.

ÌýÌýÌýÌýÌýÌýÌýÌýThe agreements governing our A/R Programs also contain certain receivable performance metrics. Any material failure to meet the applicable A/R Programs' metrics in the future could lead to an early termination event under the A/R Programs, which could require us to cease our use of such facilities, prohibiting us from additional borrowings against our receivables or, at the discretion of the lenders, requiring that we repay the A/R Programs in full. An early termination event under the A/R Programs would also constitute an event of default under our Senior Credit Facilities, which could require us to pay off the balance of the Senior Credit Facilities in full and could result in the loss of our Senior Credit Facilities.