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Quarterly report pursuant to Section 13 or 15(d)

DEBT AND CREDIT FACILITIES

v2.4.0.6
DEBT AND CREDIT FACILITIES
 3 Months Ended
Mar. 31, 2013
Debt Disclosure [Abstract] Ìý
DEBT AND CREDIT FACILITIES
NOTE 9 - DEBT AND CREDIT FACILITIES
The following represents a summary of our long-term debt as of MarchÌý31, 2013 and December 31, 2012:
($ in Millions)
Ìý
MarchÌý31, 2013
Ìý
Debt Instrument
Type
Ìý
Annual Effective Interest Rate
Ìý
Final Maturity
Ìý
Total Face Amount
Ìý
Total Debt
Ìý
$700 Million 4.875% 2021 Senior Notes
Fixed
Ìý
4.89%
Ìý
2021
Ìý
$
700.0

Ìý
$
699.4

(2)
$1.3 Billion Senior Notes:
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
$500 Million 4.80% 2020 Senior Notes
Fixed
Ìý
4.83%
Ìý
2020
Ìý
500.0

Ìý
499.2

(3)
$800 Million 6.25% 2040 Senior Notes
Fixed
Ìý
6.34%
Ìý
2040
Ìý
800.0

Ìý
790.2

(4)
$400 Million 5.90% 2020 Senior Notes
Fixed
Ìý
5.98%
Ìý
2020
Ìý
400.0

Ìý
398.3

(5)
$500 Million 3.95% 2018 Senior Notes
Fixed
Ìý
4.14%
Ìý
2018
Ìý
500.0

Ìý
495.9

(6)
$1.75 Billion Credit Facility:
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Revolving Loan
Variable
Ìý
2.65%
Ìý
2017
Ìý
1,750.0

Ìý
550.0

(7)
Total debt
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
$
4,650.0

Ìý
$
3,433.0

Ìý
Less current portion
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
—

Ìý
Long-term debt
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
$
3,433.0

Ìý
($ in Millions)
Ìý
December 31, 2012
Ìý
Debt Instrument
Type
Ìý
Annual Effective Interest Rate
Ìý
Final Maturity
Ìý
Total Face Amount
Ìý
Total Debt
Ìý
$1.25 Billion Term Loan
Variable
Ìý
1.83%
Ìý
2016
Ìý
$
847.1

(1)
$
847.1

(1)
$700 Million 4.875% 2021 Senior Notes
Fixed
Ìý
4.88%
Ìý
2021
Ìý
700.0

Ìý
699.4

(2)
$1.3 Billion Senior Notes:
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
$500 Million 4.80% 2020 Senior Notes
Fixed
Ìý
4.80%
Ìý
2020
Ìý
500.0

Ìý
499.2

(3)
$800 Million 6.25% 2040 Senior Notes
Fixed
Ìý
6.25%
Ìý
2040
Ìý
800.0

Ìý
790.2

(4)
$400 Million 5.90% 2020 Senior Notes
Fixed
Ìý
5.90%
Ìý
2020
Ìý
400.0

Ìý
398.2

(5)
$500 Million 3.95% 2018 Senior Notes
Fixed
Ìý
4.14%
Ìý
2018
Ìý
500.0

Ìý
495.7

(6)
$1.75 Billion Credit Facility:
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Revolving Loan
Variable
Ìý
2.02%
Ìý
2017
Ìý
1,750.0

Ìý
325.0

(7)
Total debt
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
$
5,497.1

Ìý
$
4,054.8

Ìý
Less current portion
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
94.1

Ìý
Long-term debt
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
$
3,960.7

Ìý
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(1)
As of March 31, 2013, the term loan was repaid in full. During the first quarter of 2013, repayments totaling $847.1 million were made. As of DecemberÌý31, 2012, $402.8 million had been paid down on the original $1.25 billion term loan and, of the remaining term loan $94.1 million, was classified as Current portion of debt. The current classification was based upon the principal payment terms of the arrangement requiring principal payments on each three-month anniversary following the funding of the term loan.
(2)
As of MarchÌý31, 2013 and DecemberÌý31, 2012, the $700 million 4.875 percent senior notes were recorded at a par value of $700 million less unamortized discounts of $0.6 million, based on an imputed interest rate of 4.89 percent.
(3)
As of MarchÌý31, 2013 and DecemberÌý31, 2012, the $500 million 4.80 percent senior notes were recorded at a par value of $500 million less unamortized discounts of $0.8 million, based on an imputed interest rate of 4.83 percent.
(4)
As of MarchÌý31, 2013 and DecemberÌý31, 2012, the $800 million 6.25 percent senior notes were recorded at par value of $800 million less unamortized discounts of $9.8 million, based on an imputed interest rate of 6.34 percent.
(5)
As of MarchÌý31, 2013 and DecemberÌý31, 2012, the $400 million 5.90 percent senior notes were recorded at a par value of $400 million less unamortized discounts of $1.7 million and $1.8 million, respectively, based on an imputed interest rate of 5.98 percent.
(6)
As of MarchÌý31, 2013 and DecemberÌý31, 2012, the $500 million 3.95 percent senior notes were recorded at a par value of $500 million less unamortized discounts of $4.1 million and $4.3 million, respectively, based on an imputed interest rate of 4.14 percent.
(7)
As of MarchÌý31, 2013 and DecemberÌý31, 2012, $550.0 million and $325.0 million revolving loans were drawn under the credit facility, respectively, and the principal amount of letter of credit obligations totaled $27.7 million for each period, thereby reducing available borrowing capacity to $1.2 billion and $1.4 billion for each period, respectively.
Credit Facility and Term Loan
On February 8, 2013, we amended the Term Loan Agreement among Cliffs Natural Resources Inc. and various lenders dated March 4, 2011, as amended, or term loan, and 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), or amended credit agreement, to effect the following:
•
Suspend the current Funded Debt to EBITDA ratio requirement for all quarterly measurement periods in 2013, after which point it will revert back to the period ending March 31, 2014 until maturity.
•
Require a Minimum Tangible Net Worth of approximately $4.6 billion as of each of the three-month periods ended March 31, 2013, June 30, 2013, September 30, 2013 and December 31, 2013. Minimum Tangible Net Worth, in accordance with the amended credit agreement and term loan, is defined as total equity less goodwill and intangible assets.
•
Maintain a Maximum Total Funded Debt to Capitalization of 52.5 percent from the amendments' effective date until the period ending December 31, 2013.
•
The amended agreements retain the Minimum Interest Coverage Ratio requirement of 2.5 to 1.0, as defined above.
During February 2013, we repaid the $847.1 million outstanding balance under the term loan through the use of proceeds from the 2013 public equity offerings. Additionally, as a result of the term loan repayment, the remaining deferred financing costs of $7.1 million were expensed. Upon the repayment of the term loan, the financial covenants associated with the term loan no longer are applicable.
Per the terms of the amended credit agreement, we are subject to higher borrowing costs. The applicable interest rate is determined by reference to the former Funded Debt to EBITDA ratio. Based on the amended terms, borrowing costs could increase as much as 0.5 percent relative to the outstanding borrowings, as well as 0.1 percent on unborrowed amounts. Furthermore, the amended credit agreement places certain restrictions upon our declaration and payment of dividends, our ability to consummate acquisitions and the debt levels of our subsidiaries.
As of March 31, 2013, we were in compliance with all applicable financial covenants related to the amended credit agreement.
At December 31, 2012, prior to the amendments made on February 8, 2013 that are discussed above, the terms of the term loan and amended credit agreement each contained customary covenants that require compliance with certain financial covenants based on: (1)Ìýdebt to earnings ratio (Total Funded Debt to EBITDA, as those terms are defined in the amended credit agreement), as of the last day of each fiscal quarter cannot exceed (i)Ìý3.5 to 1.0, if none of the $270.0 million private placement senior notes due 2013 remain outstanding, or otherwise (ii)Ìýthe then applicable maximum multiple under the $270.0 million private placement senior notes due 2013 and (2)Ìýinterest coverage ratio (Consolidated EBITDA to Interest Expense, as those terms are defined in the amended credit agreement), for the preceding four quarters must not be less than 2.5 to 1.0 on the last day of any fiscal quarter. As the $270.0 million private placement senior notes due 2013 were repaid on December 28, 2012 with proceeds from the 2012 public debt offering, the financial covenant relating to the outstanding notes no longer was applicable. As of December 31, 2012, we were in compliance with the financial covenants related to both the term loan and the amended credit agreement.
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$40.0 million ($41.7 million at March 31, 2013 and $41.6 million at December 31, 2012) in credit for contingent instruments, such as performance bonds, and the ability to request a cash advance facility to be provided at the discretion of the bank. As of MarchÌý31, 2013, the outstanding bank guarantees under this facility totaled A$34.0 million ($35.4 million), thereby reducing borrowing capacity to A$6.0 million ($6.3 million). As of DecemberÌý31, 2012, the outstanding bank guarantees under this facility totaled A$25.0 million ($26.0 million), thereby reducing borrowing capacity to A$15.0Ìýmillion ($15.6 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.
Letters of Credit
In conjunction with our acquisition of Consolidated Thompson, we issued standby letters of credit with certain financial institutions in order to support Consolidated Thompson’s and Bloom Lake’s general business obligations. In addition, we issued standby letters of credit with certain financial institutions during the third quarter of 2011 in order to support Wabush’s obligations. As of MarchÌý31, 2013 and DecemberÌý31, 2012, these letter of credit obligations totaled $95.0 million and $96.9 million, respectively. All of these standby letters of credit are in addition to the letters of credit provided for under the amended credit agreement.
Debt Maturities
The following represents a summary of our maturities of debt instruments, excluding borrowings on the amended credit agreement, based on the principal amounts outstanding at MarchÌý31, 2013:
Ìý
(In Millions)
Ìý
Maturities of Debt
2013 (April 1 - December 31)
$
—

2014
—

2015
—

2016
—

2017
—

2018 and thereafter
2,900.0

Total maturities of debt
$
2,900.0