DEBT AND CREDIT FACILITIES |
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| DEBT AND CREDIT FACILITIES |
NOTE 8 - DEBT AND CREDIT FACILITIES
The following represents a summary of our long-term debt:
Outstanding Senior Secured Notes
The following represents a summary of our senior secured notes' maturity and interest payable due dates:
The senior secured notes of each series are jointly and severally and fully and unconditionally guaranteed on a senior secured basis by substantially all of our material domestic subsidiaries and are secured (subject in each case to certain exceptions and permitted liens) by (i) a first-priority lien, on a pari passu basis with the senior secured notes of the other series, on substantially all of our assets and the assets of the guarantors, other than the ABL Collateral (as defined below), and (ii) a second-priority lien on the ABL Collateral, which is junior to a first-priority lien for the benefit of the lenders under our ABL Facility.
We may redeem the 9.875% 2025 Senior Secured Notes, in whole or in part, at any time at our option upon not less than 30, and not more than 60, days' prior notice sent to the holders of the 9.875% 2025 Senior Secured Notes. The 9.875% 2025 Senior Secured Notes are redeemable prior to October 17, 2022, at a redemption price equal to 100% of the principal amount thereof plus a "make-whole" premium set forth in the indenture, plus accrued
and unpaid interest, if any, to, but not including, the date of redemption. We may also redeem up to 35% of the aggregate principal amount of the 9.875% 2025 Senior Secured Notes prior to October 17, 2022, at a redemption price equal to 109.875% of the principal amount thereof, plus accrued and unpaid interest, if any, to but not including, the date of redemption with the net cash proceeds of one or more equity offerings. On March 11, 2021, we exercised this optional redemption feature when we purchased $322Ìýmillion aggregate principal amount of the 9.875% 2025 Senior Secured Notes using the net proceeds from the underwritten public offering of 20Ìýmillion common shares. The 9.875% 2025 Senior Secured Notes are redeemable beginning on October 17, 2022, at a redemption price equal to 107.406% of the principal amount thereof, decreasing on each April 17 thereafter until April 17, 2025, on and after which the 9.875% 2025 Senior Secured Notes are redeemable at par, in each case, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.
We may redeem the 6.750% 2026 Senior Secured Notes in whole or in part, at any time at our option upon not less than 30, and not more than 60, days' prior notice sent to the holders of the 6.750% 2026 Senior Secured Notes. The 6.750% 2026 Senior Secured Notes are redeemable prior to March 15, 2022, at a redemption price equal to 100% of the principal amount thereof plus a "make-whole" premium set forth in the indenture, plus accrued and unpaid interest, if any, to, but not including, the date of redemption. We may also redeem up to 35% of the aggregate principal amount of the 6.750% 2026 Senior Secured Notes prior to March 15, 2022, at a redemption price equal to 106.750% of the principal amount thereof, plus accrued and unpaid interest, if any, to but not including, the date of redemption with the net cash proceeds of one or more equity offerings. The 6.750% 2026 Senior Secured Notes are redeemable beginning on March 15, 2022, at a redemption price equal to 105.063% of the principal amount thereof, decreasing on each March 15 thereafter until March 15, 2025, on and after which the 6.750% 2026 Senior Secured Notes are redeemable at par, in each case, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.
In addition, if a change in control triggering event, as defined in the indenture, occurs with respect to the senior secured notes, we will be required to offer to purchase the notes at a purchase price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to, but not including, the date of purchase.
The terms of the senior secured notes contain certain customary covenants; however, there are no financial covenants.
Outstanding Senior Unsecured Notes
2021 Issuances
On February 17, 2021, we entered into an indenture among Cliffs, the guarantors party thereto and U.S. Bank National Association, as trustee, relating to the issuances of $500 million aggregate principal amount of 4.625% 2029 Senior Notes and $500 million aggregate principal amount of 4.875% 2031 Senior Notes, each issued at par. The 4.625% 2029 Senior Notes and 4.875% 2031 Senior Notes were issued in private placement transactions exempt from the registration requirements of the Securities Act.
The 4.625% 2029 Senior Notes and 4.875% 2031 Senior Notes are unsecured senior obligations and rank equally in right of payment with all of our existing and future unsecured and unsubordinated indebtedness. The 4.625% 2029 Senior Notes and 4.875% 2031 Senior Notes are guaranteed on a senior unsecured basis by our material direct and indirect wholly owned domestic subsidiaries and, therefore, are structurally senior to any of our existing and future indebtedness that is not guaranteed by such guarantors and are structurally subordinated to all existing and future indebtedness and other liabilities of our subsidiaries that do not guarantee the 4.625% 2029 Senior Notes and 4.875% 2031 Senior Notes.
In addition, if a change in control triggering event, as defined in the indenture, occurs with respect to the 4.625% 2029 Senior Notes and 4.875% 2031 Senior Notes, we will be required to offer to repurchase the notes at a purchase price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to, but not including, the date of repurchase.
The terms of the 4.625% 2029 Senior Notes and 4.875% 2031 Senior Notes contain certain customary covenants; however, there are no financial covenants.
4.625% 2029 Senior Notes
The 4.625% 2029 Senior Notes bear interest at a rate of 4.625% per annum, payable semi-annually in arrears on March 1 and September 1 of each year, commencing on September 1, 2021. The 4.625% 2029 Senior Notes will mature on March 1, 2029.
The 4.625% 2029 Senior Notes may be redeemed, in whole or in part, on not less than 10, nor more than 60, days’ prior notice sent to the holders of the notes. The following is a summary of redemption prices for our 4.625% 2029 Senior Notes:
4.875% 2031 Senior Notes
The 4.875% 2031 Senior Notes bear interest at a rate of 4.875% per annum, payable semi-annually in arrears on March 1 and September 1 of each year, commencing on September 1, 2021. The 4.875% 2031 Senior Notes will mature on March 1, 2031.
The 4.875% 2031 Senior Notes may be redeemed, in whole or in part, on not less than 10, nor more than 60, days’ prior notice sent to the holders of the notes. The following is a summary of redemption prices for our 4.875% 2031 Senior Notes:
1.500% 2025 Convertible Senior Notes
The 1.500% 2025 Convertible Senior Notes bear interest at a rate of 1.500% per year, payable semiannually in arrears on January 15 and July 15 of each year. The 1.500% 2025 Convertible Senior Notes mature on January 15, 2025. The 1.500% 2025 Convertible Senior Notes are senior unsecured obligations and rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the 1.500% 2025 Convertible Senior Notes; equal in right of payment to any of our unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of our subsidiaries. The terms of the 1.500% 2025 Convertible Senior Notes contain certain customary covenants; however, there are no financial covenants.
Holders may convert their 1.500% 2025 Convertible Senior Notes at their option at any time prior to the close of business on the business day immediately preceding July 15, 2024, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on March 31, 2018, if the last reported sale price of our common shares, par value $0.125 per share, for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five-business day period after any five-consecutive trading day period (the “measurement periodâ€) in which the trading price per $1,000 principal amount of 1.500% 2025 Convertible Senior Notes for each trading day of
the measurement period was less than 98% of the product of the last reported sale price of our common shares and the conversion rate on each such trading day; (3) if we call the notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events. On or after July 15, 2024 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their 1.500% 2025 Convertible Senior Notes at any time, regardless of the foregoing circumstances. Upon conversion, we will pay or deliver, as the case may be, cash, common shares or a combination of cash and common shares, at our election.
Upon the issuance of the 1.500% 2025 Convertible Senior Notes the initial conversion rate was 122.4365 common shares per $1,000 principal, with a conversion price of $8.17 per common share. The conversion rate is subject to adjustment in some circumstances, including the payment of dividends on common shares, but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date, or if we deliver a notice of redemption, we will, in certain circumstances, increase the conversion rate for a holder who elects to convert its 1.500% 2025 Convertible Senior Notes in connection with such a corporate event or notice of redemption, as the case may be. As of DecemberÌý31, 2021, the conversion rate was 129.2985 common shares per $1,000 principal amount of 1.500% 2025 Convertible Senior Notes.
We may not redeem the 1.500% 2025 Convertible Senior Notes prior to January 15, 2022. We may redeem all or any portion of the 1.500% 2025 Convertible Senior Notes, for cash at our option on or after January 15, 2022 if the last reported sale price of our common shares has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30-consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the principal amount of the 1.500% 2025 Convertible Senior Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.
If we undergo a fundamental change as defined in the indenture, holders may require us to repurchase for cash all or any portion of their 1.500% 2025 Convertible Senior Notes at a fundamental change repurchase price equal to 100% of the principal amount of the 1.500% 2025 Convertible Senior Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
In accounting for the issuance of the notes, we separated the 1.500% 2025 Convertible Senior Notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of similar liabilities that did not have associated convertible features. The carrying amount of the equity component of $86 million representing the conversion option was determined by deducting the fair value of the liability component from the par value of the notes. The difference represents the debt discount that is amortized to interest expense over the term of the notes. The equity component is not remeasured as long as it continues to qualify for equity classification.
On December 1, 2021, we issued a notice of redemption for all $294Ìýmillion aggregate principal amount outstanding of the 1.500% 2025 Convertible Senior Notes. Refer to NOTE 21 - SUBSEQUENT EVENTS for further information on the redemption of the 1.500% 2025 Convertible Senior Notes.
Other Outstanding Unsecured Senior Notes
The following represents a summary of our other unsecured senior notes' maturity and interest payable due dates:
The senior notes are unsecured obligations and rank equally in right of payment with all our other existing and future unsecured and unsubordinated indebtedness. The 7.000% 2027 Senior Notes and 5.875% 2027 Senior Notes are guaranteed on a senior unsecured basis by our material direct and indirect wholly owned domestic subsidiaries and, therefore, are structurally senior to any of our existing and future indebtedness that is not guaranteed by such guarantors and are structurally subordinated to all existing and future indebtedness and other liabilities of our subsidiaries that do not guarantee the notes. There are no subsidiary guarantees of the interest and principal amounts for the 6.250% 2040 Senior Notes.
The 7.000% 2027 Senior Notes may be redeemed, in whole or in part, at any time at our option upon not less than 30, and not more than 60 days' prior notice sent to the holders. The 7.000% 2027 Senior Notes are redeemable prior to March 15, 2022, at a redemption price equal to 100% of the principal amount thereof plus a "make-whole" premium set forth in the indenture, plus accrued and unpaid interest, if any, to, but not including, the date of redemption. The 7.000% 2027 Senior Notes are redeemable beginning on March 15, 2022, at a redemption price equal to 103.500% of the principal amount thereof, decreasing on each March 15 thereafter until March 15, 2025, on and after which the 7.000% 2027 Senior Notes are redeemable at par, in each case, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.
The 5.875% 2027 Senior Notes are redeemable prior to June 1, 2022, at a redemption price equal to 100% of the principal amount thereof plus a “make-whole†premium set forth in the indenture, plus accrued and unpaid interest, if any, to, but not including, the date of redemption. We may also redeem up to 35% of the aggregate principal amount of the 5.875% 2027 Senior Notes prior to June 1, 2022 at a redemption price equal to 105.875% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the date of redemption with the net cash proceeds of one or more equity offerings. The 5.875% 2027 Senior Notes are redeemable beginning on June 1, 2022, at a redemption price equal to 102.938% of the principal amount thereof, decreasing on each June 1 thereafter until June 1, 2025, on and after which the 5.875% 2027 Senior Notes are redeemable at par, in each case, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.
The 6.250% 2040 Senior Notes may be redeemed any time at our option upon not less than 30, nor more than 60, days' prior notice is sent to the holders. The 6.250% 2040 Senior Notes are redeemable at a redemption price equal to the greater of (1)Ìý100% of the principal amount of the notes to be redeemed or (2)Ìýthe sum of the present values of the remaining scheduled payments of principal and interest on the notes to be redeemed, discounted to the redemption date on a semi-annual basis at the treasury rate plus 40 basis points, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.
In addition, if a change of control triggering event, as defined in the applicable indenture, occurs with respect to the unsecured notes, we will be required to offer to purchase the notes of the applicable series at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the date of purchase.
The terms of the unsecured notes contain certain customary covenants; however, there are no financial covenants.
AK Steel Corporation Unsecured Senior Notes
As of December 31, 2021, AK Steel had outstanding a total of $56 million aggregate principal amount of 7.000% 2027 AK Senior Notes. These senior notes are unsecured obligations and rank equally in right of payment with AK Steel's guarantees of Cliffs' unsecured and unsubordinated indebtedness. These notes contain no financial covenants.
The 7.000% 2027 AK Senior Notes may be redeemed, in whole or in part, at any time at our option upon not less than 30, and not more than 60, days' prior notice sent to the holders. The 7.000% 2027 AK Senior Notes are redeemable prior to March 15, 2022, at a redemption price equal to 100% of the principal amount thereof plus a “make-whole†premium set forth in the indenture, plus accrued and unpaid interest, if any, to, but not including, the date of redemption. The 7.000% 2027 AK Senior Notes are redeemable beginning on March 15, 2022, at a redemption price equal to 103.500% of the principal amount thereof, decreasing on each March 15 thereafter until March 15, 2025, on and after which the 7.000% 2027 Senior Notes are redeemable at par, in each case, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.
ABL Facility
On March 13, 2020, in connection with the AK Steel Merger, we entered into a new ABL Facility with various financial institutions to replace and refinance Cliffs’ Former ABL Facility and AK Steel Corporation’s former revolving credit facility. The ABL Facility will mature upon the earlier of March 13, 2025 or 91 days prior to the maturity of certain other material debt and provided for up to $2 billion in borrowings, including a $555 million sublimit for the issuance of letters of credit and a $125 million sublimit for swingline loans. Availability under the ABL Facility is limited to an eligible borrowing base, as applicable, determined by applying customary advance rates to eligible accounts receivable, inventory and certain mobile equipment.
On March 27, 2020, we amended our ABL Facility to, among other things, provide for a new FILO tranche B of commitments in the aggregate amount of $150 million by exchanging existing commitments under the ABL Facility.
The total commitments under the ABL Facility after giving effect to this first amendment remained at $2 billion. The terms and conditions (other than the pricing) that apply to the FILO tranche were substantially the same as the terms and conditions that apply to the tranche A facility of the ABL Facility immediately prior to the amendment.
On December 9, 2020, we entered into the Second ABL Amendment. The Second ABL Amendment modified the ABL Facility to, among other things, increase the amount of tranche A revolver commitments available thereunder by an additional $1.5 billion and increase certain dollar baskets related to certain negative covenants that apply to the ABL Facility. After giving effect to the ABL Amendment, the aggregate principal amount of tranche A revolver commitments under the ABL Facility was $3.35 billion and the aggregate principal amount of FILO tranche B revolver commitments under the ABL Facility remained at $150 million.
On December 17, 2021, we entered into the Third ABL Amendment. The Third ABL Amendment modified the ABL Facility to, among other things, increase the amount of tranche A revolver commitments available thereunder by an additional $1Ìýbillion and exchange $150Ìýmillion of tranche B revolver commitments available thereunder for tranche A revolver commitments. After giving effect to the Third ABL Amendment, the aggregate principal amount of tranche A revolver commitments under the ABL Facility is $4.5Ìýbillion and there are no remaining tranche B revolver commitments under the ABL Facility. The increase is a result of a larger projected borrowing base driven by more favorable market conditions.
The ABL Facility and certain bank products and hedge obligations are guaranteed by certain of our existing wholly owned U.S. subsidiaries and are required to be guaranteed by certain of our future U.S. subsidiaries. Amounts outstanding under the ABL Facility are secured by (i) a first-priority security interest in the accounts receivable and other rights to payment, inventory, as-extracted collateral, certain investment property, deposit accounts, securities accounts, certain general intangibles and commercial tort claims, certain mobile equipment, commodities accounts and other related assets of ours, the other borrowers and the guarantors, and proceeds and products of each of the foregoing (collectively, the “ABL Collateralâ€) and (ii) a second-priority security interest in substantially all of our assets and the assets of the other borrowers and the guarantors other than the ABL Collateral.
Borrowings under the ABL Facility bear interest, at our option, at a base rate or, if certain conditions are met, a LIBOR rate, in each case, plus an applicable margin. We may amend our ABL Facility to replace the LIBOR rate with one or more secured overnight financing based rates or an alternative benchmark rate, giving consideration to any evolving or then-existing convention for similar dollar denominated syndicated credit facilities for such alternative benchmarks.
The ABL Facility contains customary representations and warranties and affirmative and negative covenants including, among others, covenants regarding the maintenance of certain financial ratios if certain conditions are triggered, covenants relating to financial reporting, covenants relating to the payment of dividends on, or purchase or redemption of, our capital stock, covenants relating to the incurrence or prepayment of certain debt, covenants relating to the incurrence of liens or encumbrances, covenants relating to compliance with laws, covenants relating to transactions with affiliates, covenants relating to mergers and sales of all or substantially all of our assets and limitations on changes in the nature of our business.
The ABL Facility provides for customary events of default, including, among other things, the event of nonpayment of principal, interest, fees or other amounts, a representation or warranty proving to have been materially incorrect when made, failure to perform or observe certain covenants within a specified period of time, a cross-default to certain material indebtedness, the bankruptcy or insolvency of the Company and certain of its subsidiaries, monetary judgment defaults of a specified amount, invalidity of any loan documentation, a change of control of the Company, and ERISA defaults resulting in liability of a specified amount. If an event of default exists (beyond any applicable grace or cure period), the administrative agent may, and at the direction of the requisite number of lenders shall, declare all amounts owing under the ABL Facility immediately due and payable, terminate such lenders’ commitments to make loans under the ABL Facility and/or exercise any and all remedies and other rights under the ABL Facility. For certain events of default related to insolvency and receivership, the commitments of the lenders will be automatically terminated and all outstanding loans and other amounts will become immediately due and payable.
As of DecemberÌý31, 2021 and 2020, we were in compliance with the ABL Facility liquidity requirements and, therefore, the springing financial covenant requiring a minimum fixed charge coverage ratio of 1.0 to 1.0 was not applicable.
The following represents a summary of our borrowing capacity under the ABL Facility:
Other Financing Arrangements
Industrial Revenue Bonds
AK Steel had outstanding $66 million aggregate principal amount of fixed-rate, tax-exempt IRBs as of DecemberÌý31, 2021. The weighted-average fixed rate of these IRBs is 6.86%. These IRBs are unsecured senior debt obligations that are equal in ranking with AK Steel's senior notes and AK Steel's guarantees of Cliffs' unsubordinated indebtedness. These IRBs are effectively subordinated to AK Steel’s guarantees of Cliffs’ secured indebtedness to the extent of the value of AK Steel’s assets securing such guarantees. These IRBs contain certain customary covenants; however, there are no financial covenants.
Debt Extinguishment - 2021
During the fourth quarter of 2021, we paid in full the outstanding balance of our EDC revolving facilities for $55Ìýmillion in aggregate principal amount and terminated the agreements. Prior to such terminations, the EDC revolving facilities provided for up to $80 million in borrowings.
On October 15, 2021, we redeemed $26 million in aggregate principal amount of the IRBs due 2024. During the third quarter of 2021, we repurchased $2Ìýmillion in aggregate principal amount of 1.500% 2025 Convertible Senior Notes. On June 28, 2021, we redeemed all $396Ìýmillion aggregate principal amount outstanding of the 5.750% 2025 Senior Notes using available liquidity. During the second quarter of 2021, we also repurchased $25Ìýmillion aggregate principal amount of 9.875% 2025 Senior Secured Notes.
On March 11, 2021, we purchased $322Ìýmillion aggregate principal amount of the 9.875% 2025 Senior Secured Notes using the net proceeds from the February 11, 2021 issuance of 20Ìýmillion common shares and cash on hand. On March 12, 2021, we fully redeemed the 4.875% 2024 Senior Secured Notes, 7.625% 2021 AK Senior Notes, 7.50% 2023 AK Senior Notes, 6.375% 2025 Senior Notes and 6.375% 2025 AK Senior Notes, which totaled an aggregate principal amount of $535Ìýmillion.
The following is a summary of the debt extinguished and the respective impact on extinguishment:
Debt Extinguishment - 2020
During the year ended December 31, 2020, we used the net proceeds from the offering of the additional 9.875% 2025 Senior Secured Notes to repurchase $736 million aggregate principal amount of our outstanding senior notes of various series, which resulted in a net debt reduction of $181 million. We also repurchased an additional $35 million aggregate principal amount of our outstanding senior notes of various series and we redeemed $7 million aggregate principal amount of our outstanding 2020 IRBs, with cash on hand.
Additionally, in connection with the AK Steel Merger, we purchased $364 million aggregate principal amount of 7.625% 2021 AK Senior Notes and $311 million aggregate principal amount of 7.500% 2023 AK Senior Notes upon early settlement of tender offers made by Cliffs. The net proceeds from the offering of 6.750% 2026 Senior Secured Notes, along with a portion of the ABL Facility borrowings, were used to fund such purchases. As the 7.625% 2021 AK Senior Notes and 7.500% 2023 AK Senior Notes were recorded at fair value just prior to being purchased, there was no gain or loss on extinguishment. Additionally, in connection with the final settlement of the tender offers, we purchased $9 million aggregate principal amount of the 7.625% 2021 AK Senior Notes and $56 million aggregate principal amount of the 7.500% 2023 AK Senior Notes with cash on hand.
The following is a summary of the debt extinguished and the respective impact on extinguishment:
Debt Extinguishment - 2019
During the year ended DecemberÌý31, 2019, we used the net proceeds from the issuance of $750 million aggregate principal amount of 5.875% 2027 Senior Notes, along with cash on hand, to redeem in full all of our outstanding 4.875% 2021 Senior Notes and to fund the repurchase of $600 million aggregate principal amount of our outstanding 5.750% 2025 Senior Notes in a tender offer.
The following is a summary of the debt extinguished and the respective impact on extinguishment:
Debt Maturities
The following represents a summary of our debt instrument maturities based on the principal amounts outstanding at DecemberÌý31, 2021:
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