ÐÇ¿Õ´«Ã½

Quarterly report pursuant to Section 13 or 15(d)

DEBT AND CREDIT FACILITIES

v3.24.3
DEBT AND CREDIT FACILITIES
 9 Months Ended
Sep. 30, 2024
Debt Disclosure [Abstract] Ìý
DEBT AND CREDIT FACILITIES
NOTE 7 - DEBT AND CREDIT FACILITIES
The following represents a summary of our long-term debt:
(In millions)
Debt Instrument
Issuer1
Annual Effective
Interest Rate		 September 30,
2024		 December 31,
2023
Senior Secured Notes:
6.750% 2026 Senior Secured Notes
 Cliffs 6.990% $ —Ìý $ 829Ìý
Senior Unsecured Notes:
7.000% 2027 Senior Notes
 Cliffs 9.240% 73Ìý 73Ìý
7.000% 2027 AK Senior Notes
 AK Steel 9.240% 56Ìý 56Ìý
5.875% 2027 Senior Notes
 Cliffs 6.490% 556Ìý 556Ìý
4.625% 2029 Senior Notes
Cliffs 4.625% 368Ìý 368Ìý
6.750% 2030 Senior Notes
 Cliffs 6.750% 750Ìý 750Ìý
4.875% 2031 Senior Notes
 Cliffs 4.875% 325Ìý 325Ìý
7.000% 2032 Senior Notes
 Cliffs 7.054% 1,425Ìý —Ìý
6.250% 2040 Senior Notes
 Cliffs 6.340% 235Ìý 235Ìý
ABL Facility
Cliffs2
Variable3
47Ìý —Ìý
Total principal amount 3,835Ìý 3,192Ìý
Unamortized discounts and issuance costs (61) (55)
Total long-term debt $ 3,774Ìý $ 3,137Ìý
1 Unless otherwise noted, references in this column and throughout this NOTE 7 - DEBT AND CREDIT FACILITIES to "Cliffs" are to ÐÇ¿Õ´«Ã½ Inc., and references to "AK Steel" are to AK Steel Corporation (n/k/a ÐÇ¿Õ´«Ã½ Steel Corporation).
2 Refers to ÐÇ¿Õ´«Ã½ Inc. as borrower under our ABL Facility.
3 Our ABL Facility annual effective interest rate was 8.25% as of SeptemberÌý30, 2024. Any incremental borrowings on our ABL Facility, as of September 30, 2024, would have had an interest rate between 5.63% and 8.25%.
7.000% 2032 SENIOR NOTES OFFERING
On March 18, 2024, we entered into an indenture among Cliffs, the guarantors party thereto and U.S. Bank Trust Company, National Association, as trustee, relating to the issuance of $825Ìýmillion aggregate principal amount of our 7.000% 2032 Senior Notes, which were issued at par. The 7.000% 2032 Senior Notes were issued in a private placement transaction exempt from the registration requirements of the Securities Act.
On August 16, 2024, we issued an additional $600Ìýmillion aggregate principal amount of our 7.000% 2032 Senior Notes in a private placement transaction exempt from the registration requirements of the Securities Act. These additional notes were issued at a price of 99.25% of their principal amount. Furthermore, the additional notes are treated as the same class and series as the initial notes issued on March 18, 2024, other than with respect to the date of issuance and issue price. The net proceeds from the transaction were used to finance a portion of the cash consideration paid in connection with the Stelco Acquisition, which we completed on November 1, 2024.
The 7.000% 2032 Senior Notes bear interest at a rate of 7.000% per annum, payable semi-annually in arrears on March 15 and September 15 of each year, commencing on September 15, 2024. The 7.000% 2032 Senior Notes mature on March 15, 2032.
The 7.000% 2032 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 7.000% 2032 Senior Notes are guaranteed on a senior unsecured basis by our material direct and indirect wholly owned domestic subsidiaries. The 7.000% 2032 Senior Notes are structurally subordinated to all existing and future indebtedness and other liabilities of our subsidiaries that do not guarantee the 7.000% 2032 Senior Notes.
The 7.000% 2032 Senior Notes may be redeemed, in whole or in part, at any time at our option not less than 10 days nor more than 60 days after prior notice is sent to the holders of the 7.000% 2032 Senior Notes. The 7.000% 2032 Senior Notes are redeemable prior to March 15, 2027, at a redemption price equal to 100% of the principal amount thereof plus a "make-whole" premium set forth in the indenture. We may also redeem up to 35% of the aggregate principal amount of the 7.000% 2032 Senior Notes prior to March 15, 2027, at a redemption price equal to 107.000% of the principal amount thereof with the net cash proceeds of one or more equity offerings. The 7.000% 2032 Senior Notes are redeemable beginning on March 15, 2027, at a redemption price equal to 103.500% of the principal amount thereof, decreasing to 101.750% on March 15, 2028, and are redeemable at par beginning on March 15, 2029. In each case, we pay the applicable redemption or "make-whole" premiums 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 7.000% 2032 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 7.000% 2032 Senior Notes contain certain customary covenants; however, there are no financial covenants.
ABL FACILITY
On July 31, 2024 and September 13, 2024, in connection with the Stelco Acquisition, we entered into the fifth and sixth amendments to our ABL Facility, respectively. The amendments, among other things, (i) amend the normal conditions for borrowing loans to allow for the Stelco Acquisition and permit additional borrowings for the purpose of financing a portion of the Stelco Acquisition purchase price, and (ii) subsequent to the Stelco Acquisition and the satisfaction of customary conditions, divide the existing $4.75 billion of aggregate lending commitments under our ABL Facility into two tranches, (x) a $4.25 billion tranche of lending commitments available to be borrowed by the Company and certain U.S. subsidiaries of the Company that are designated as borrowers from time to time in accordance with the ABL Facility and (y) a $500 million tranche of lending commitments available to be borrowed by certain Canadian subsidiaries of the Company that are designated as borrowers from time to time in accordance with the ABL Facility.
As of SeptemberÌý30, 2024, 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:
(In millions) September 30,
2024
Available borrowing base on ABL Facility1
$ 3,833Ìý
Borrowings (47)
Letter of credit obligations2
(46)
Borrowing capacity available $ 3,740Ìý
1 As of SeptemberÌý30, 2024, the ABL Facility has a maximum available borrowing base of $4.75 billion. The borrowing base is determined by applying customary advance rates to eligible accounts receivable, inventory and certain mobile equipment.
2 We issued standby letters of credit with certain financial institutions in order to support business obligations, including, but not limited to, operating agreements, employee severance, environmental obligations, workers' compensation and insurance obligations.
COMMITMENT LETTER
In the third quarter of 2024, we entered into a Commitment Letter under which a syndicate of banks committed to provide us with up to $3.3Ìýbillion of financing under a Bridge Facility to finance the Stelco Acquisition. Per terms outlined in the Commitment Letter, the Bridge Facility was subsequently reduced to $2.4Ìýbillion at September 13, 2024, the effective date of the sixth amendment to the ABL Facility. As of SeptemberÌý30, 2024, the Bridge Facility was available in a single draw on the closing date of the Stelco Acquisition and had a maturity date 364 days after the closing date. The Bridge Facility is also subject to further reductions as outlined in the Commitment Letter, including reductions equal to 100% of the net cash proceeds from any issuance of senior notes. The Bridge Facility commitment terminates on the earliest of (i) five business days after April 14, 2025 (or as such date may be extended under the terms of the Arrangement Agreement), (ii) the consummation of the Stelco Acquisition and (iii) the date that the Arrangement Agreement is terminated or expires in accordance with its terms without the closing of the Stelco Acquisition. See NOTE 18 - SUBSEQUENT EVENTS for further information.
DEBT EXTINGUISHMENTS
On March 18, 2024, we used a portion of the net proceeds from the initial 7.000% 2032 Senior Notes issuance to repurchase $640Ìýmillion in aggregate principal amount of our 6.750% 2026 Senior Secured Notes pursuant to a tender offer. On April 3, 2024, we redeemed the remaining $189Ìýmillion in aggregate principal amount of our then-outstanding 6.750% 2026 Senior Secured Notes with the remaining portion of the net proceeds from the initial 7.000% 2032 Senior Notes issuance and available liquidity.
DEBT MATURITIES
The following represents a summary of our maturities of debt instruments based on the principal amounts outstanding at SeptemberÌý30, 2024 (in millions):
2024 2025 2026 2027 2028 Thereafter Total
$ —Ìý $ —Ìý $ —Ìý $ 685Ìý $ 47Ìý $ 3,103Ìý $ 3,835Ìý