NOTE 8 - DEBT AND CREDIT FACILITIES
The following represents a summary of our long-term debt as of SeptemberÌý30, 2014 and DecemberÌý31, 2013:
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($ in Millions) |
Ìý |
SeptemberÌý30, 2014 |
Ìý |
Debt Instrument |
Ìý |
Type |
Ìý |
Annual Effective Interest Rate |
Ìý |
Final Maturity |
Ìý |
Total Face Amount |
Ìý |
Total Debt |
Ìý |
$700 Million 4.875% 2021 Senior Notes |
Ìý |
Fixed |
Ìý |
4.89% |
Ìý |
2021 |
Ìý |
$ |
700.0 |
|
Ìý |
$ |
699.5 |
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(1) |
$1.3 Billion Senior Notes: |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
$500 Million 4.80% 2020 Senior Notes |
Ìý |
Fixed |
Ìý |
4.83% |
Ìý |
2020 |
Ìý |
500.0 |
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Ìý |
499.3 |
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(2) |
$800 Million 6.25% 2040 Senior Notes |
Ìý |
Fixed |
Ìý |
6.34% |
Ìý |
2040 |
Ìý |
800.0 |
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Ìý |
790.5 |
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(3) |
$400 Million 5.90% 2020 Senior Notes |
Ìý |
Fixed |
Ìý |
5.98% |
Ìý |
2020 |
Ìý |
400.0 |
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Ìý |
398.6 |
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(4) |
$500 Million 3.95% 2018 Senior Notes |
Ìý |
Fixed |
Ìý |
4.14% |
Ìý |
2018 |
Ìý |
500.0 |
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Ìý |
497.1 |
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(5) |
$1.25 Billion Credit Facility: |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Revolving Credit Agreement |
Ìý |
Variable |
Ìý |
1.87% |
Ìý |
2017 |
Ìý |
1,250.0 |
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Ìý |
— |
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(6) |
Equipment Loans |
Ìý |
Fixed |
Ìý |
Various |
Ìý |
2020 |
Ìý |
164.8 |
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Ìý |
146.1 |
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Ìý |
Short-Term Borrowing Arrangements |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
2014/2015 |
Ìý |
213.2 |
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Ìý |
213.2 |
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Fair Value Adjustment to Interest Rate Hedge |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
2.9 |
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Ìý |
Total debt |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
$ |
4,528.0 |
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Ìý |
$ |
3,247.2 |
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Ìý |
Less: Short-term and current portion of long-term debt |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
234.7 |
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Ìý |
Long-term debt |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
$ |
3,012.5 |
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Ìý |
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($ in Millions) |
Ìý |
December 31, 2013 |
Ìý |
Debt Instrument |
Ìý |
Type |
Ìý |
Annual Effective Interest Rate |
Ìý |
Final Maturity |
Ìý |
Total Face Amount |
Ìý |
Total Debt |
Ìý |
$700 Million 4.875% 2021 Senior Notes |
Ìý |
Fixed |
Ìý |
4.88% |
Ìý |
2021 |
Ìý |
700.0 |
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Ìý |
699.4 |
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(1) |
$1.3 Billion Senior Notes: |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
$500 Million 4.80% 2020 Senior Notes |
Ìý |
Fixed |
Ìý |
4.83% |
Ìý |
2020 |
Ìý |
500.0 |
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Ìý |
499.2 |
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(2) |
$800 Million 6.25% 2040 Senior Notes |
Ìý |
Fixed |
Ìý |
6.34% |
Ìý |
2040 |
Ìý |
800.0 |
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Ìý |
790.4 |
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(3) |
$400 Million 5.90% 2020 Senior Notes |
Ìý |
Fixed |
Ìý |
5.98% |
Ìý |
2020 |
Ìý |
400.0 |
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Ìý |
398.4 |
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(4) |
$500 Million 3.95% 2018 Senior Notes |
Ìý |
Fixed |
Ìý |
4.14% |
Ìý |
2018 |
Ìý |
500.0 |
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Ìý |
496.5 |
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(5) |
$1.75 Billion Credit Facility: |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Revolving Credit Agreement |
Ìý |
Variable |
Ìý |
1.64% |
Ìý |
2017 |
Ìý |
1,750.0 |
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Ìý |
— |
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(6) |
Equipment Loans |
Ìý |
Fixed |
Ìý |
Various |
Ìý |
2020 |
Ìý |
164.8 |
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Ìý |
161.7 |
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Ìý |
Fair Value Adjustment to Interest Rate Hedge |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
(2.1 |
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Ìý |
Total debt |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
$ |
4,814.8 |
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Ìý |
$ |
3,043.5 |
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Ìý |
Less: Short-term and current portion of long-term debt |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
20.9 |
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Ìý |
Long-term debt |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
Ìý |
$ |
3,022.6 |
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Ìý |
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(1) |
As of SeptemberÌý30, 2014 and DecemberÌý31, 2013, the $700 million 4.875 percent senior notes were recorded at a par value of $700 million less unamortized discounts of $0.5 million and $0.6 million, respectively, based on an imputed interest rate of 4.89 percent.
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(2) |
As of SeptemberÌý30, 2014 and DecemberÌý31, 2013, the $500 million 4.80 percent senior notes were recorded at a par value of $500 million less unamortized discounts of $0.7 million and $0.8 million, respectively, based on an imputed interest rate of 4.83 percent.
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(3) |
As of SeptemberÌý30, 2014 and DecemberÌý31, 2013, the $800 million 6.25 percent senior notes were recorded at a par value of $800 million less unamortized discounts of $9.5 million and $9.6 million, respectively, based on an imputed interest rate of 6.34 percent.
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(4) |
As of SeptemberÌý30, 2014 and DecemberÌý31, 2013, the $400 million 5.90 percent senior notes were recorded at a par value of $400 million less unamortized discounts of $1.4 million and $1.6 million, respectively, based on an imputed interest rate of 5.98 percent.
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(5) |
As of SeptemberÌý30, 2014 and DecemberÌý31, 2013, the $500 million 3.95 percent senior notes were recorded at a par value of $500 million less unamortized discounts of $2.9 million and $3.5 million, respectively, based on an imputed interest rate of 4.14 percent.
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(6) |
As of SeptemberÌý30, 2014 and DecemberÌý31, 2013, no revolving loans were drawn under the revolving credit agreement. As of SeptemberÌý30, 2014 and DecemberÌý31, 2013, the principal amount of letter of credit obligations totaled $5.2 million and $8.4 million, respectively, thereby reducing available borrowing capacity to $1.2 billion and $1.7 billion for each period, respectively.
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Credit Facility
On September 9, 2014, we amended the Amended and Restated Multicurrency Credit Agreement among Cliffs Natural Resources Inc. and various lenders dated August 11, 2011 (as further amended by Amendment No. 1 as of October 16, 2012, Amendment No. 2 as of February 8, 2013 and Amendment No. 3 as of June 30, 2014), or revolving credit agreement, to effect the following:
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Permitting a one-time exemption of up to $200 million in share repurchases (consummated in a single transaction or series of related transactions), effective until December 31, 2015.
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Reducing the size of the existing unsecured facility from $1.75 billion to $1.25 billion.
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Adding restrictions on the granting of certain pledges and guarantees. |
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Adding an obligation to enter into a security agreement, on or before June 30, 2015, to grant security interests to secure obligations under the revolving credit agreement, subject to certain limitations. |
Additionally, since Amendment No. 4 as of September 9, 2014, decreased the maximum available credit of the existing line of credit by $500 million while leaving the remaining term unchanged, the borrowing capacity of the line of credit decreased. As a result of this change in borrowing capacity, $2.8 million of the $9.9 million in unamortized debt issuance costs were expensed as of the effective date of the amendment.
The amended facility retains substantial financial flexibility for management to execute our strategy and provides us a consistent source of liquidity. All terms of Amendment No. 3 as of June 30, 2014, as discussed below, remain in place and are not changed by Amendment No. 4 as of September 9, 2014.
Previously this year, on June 30, 2014, we amended the revolving credit agreement to effect the following:
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Replacing the current maximum leverage covenant ratio of debt to earnings of less than 3.5 times with a maximum balance sheet leverage ratio of debt to capitalization of less than 45 percent.
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Resetting the minimum interest coverage ratio from 2.5 to 1.0 to the ratio of 3.5 to 1.0.
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Amending the definition of EBITDA to include certain cash charges related to the Company’s Wabush mine and other cash restructuring charges and the definition of net worth to exclude up to $1 billion in non-cash impairment charges.
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Modifying the covenants restricting certain investments and acquisitions, the incurrence of certain indebtedness and liens, and the amount of dividends that may be declared or paid and shares that may be repurchased. |
On October 24, 2014, we further amended the revolving credit agreement. Refer to NOTE 20 - SUBSEQUENT EVENTS for further information regarding Amendment No. 5.
As of September 30, 2014, we were in compliance with all financial covenants related to the revolving credit agreement inclusive of the changes made in Amendment No. 5. Additionally, as of December 31, 2013, we were in compliance with all applicable financial covenants related to the revolving credit agreement.
Short-Term Borrowing Arrangements
As of September 30, 2014, we had outstanding borrowings of $150.0 million on our uncommitted credit facility agreements which were used for general corporate purposes. ÌýPer the uncommitted credit agreement, each loan drawn cannot be outstanding less than 30 days or more than 90 days. ÌýInterest payable under the uncommitted credit facility is at a variable rate based on LIBOR plus an agreed upon margin of approximately one percent.
On April 22, 2014, we established an accounts receivable securitization facility for certain domestic subsidiaries that provides up to $110.0 million of funding and expires on April 21, 2015. Availability under this facility is based on eligible receivable balances. At SeptemberÌý30, 2014, the amounts available and utilized under this program totaled $45.2 million. Interest payable under the credit facility is at a variable rate based on LIBOR type rate plus an agreed upon margin of less than one percent. On October 24, 2014, we amended the revolving credit agreement which eliminated the accounts receivable securitization facility.
As of September 30, 2014, we had outstanding borrowings of $18.0 million on pre-export trade finance loans. Per the agreements, the loans drawn have fixed maturity dates that are short-term in nature. Interest payable under the pre-export trade finance loans are at a fixed rate of less than one percent.
Letters of Credit
We issued standby letters of credit with certain financial institutions in order to support general business obligations including, but not limited to, workers compensation and environmental obligations. As of SeptemberÌý30, 2014 and DecemberÌý31, 2013, these letter of credit obligations totaled $43.9 million and $48.0 million, respectively. All of these standby letters of credit are in addition to the letters of credit provided for under the revolving credit agreement.
Other Short-Term Facilities
Asia Pacific Iron Ore maintains a bank contingent instrument and cash advance facility. The facility, which is renewable annually at the bank’s discretion, provides A$30.0 million ($26.2 million) at SeptemberÌý30, 2014 in credit for contingent instruments, such as performance bonds. At DecemberÌý31, 2013, the facility provided A$30.0 million ($26.8 million) in credit for contingent instruments. As of SeptemberÌý30, 2014, the outstanding bank guarantees under the facility totaled A$22.9 million ($20.1 million), thereby reducing borrowing capacity to A$7.1 million ($6.1 million). As of DecemberÌý31, 2013, the outstanding bank guarantees under the facility totaled A$23.0 million ($20.5 million), thereby reducing borrowing capacity to A$7.0Ìýmillion ($6.3 million). We have provided a guarantee of the facility, along with certain of our Australian subsidiaries. The terms of the short-term facility contain certain customary covenants; however, there are no financial covenants.
Debt Maturities
The following represents a summary of our maturities of debt instruments, excluding borrowings on the revolving credit agreement, based on the principal amounts outstanding at SeptemberÌý30, 2014:
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Ìý |
(In Millions) |
Ìý |
Maturities of Debt |
2014 (October 1 - December 31) |
$ |
218.5 |
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2015 |
21.8 |
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2016 |
22.7 |
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2017 |
23.6 |
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2018 |
524.7 |
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2019 and thereafter |
2,448.0 |
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Total maturities of debt |
$ |
3,259.3 |
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