Cleveland-Cliffs Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

DEBT AND CREDIT FACILITIES

DEBT AND CREDIT FACILITIES

9 Months Ended

Sep. 30, 2014

Debt Disclosure [Abstract]

DEBT AND CREDIT FACILITIES

NOTE 8 - DEBT AND CREDIT FACILITIES

The following represents a summary of our long-term debt as of September 30, 2014 and December 31, 2013:



($ in Millions)
September 30, 2014
Debt Instrument	Type	Annual Effective Interest Rate	Final Maturity	Total Face Amount		Total Debt
$700 Million 4.875% 2021 Senior Notes	Fixed	4.89%	2021	$	700.0	$	699.5	(1)
$1.3 Billion Senior Notes:
$500 Million 4.80% 2020 Senior Notes	Fixed	4.83%	2020	500.0		499.3		(2)
$800 Million 6.25% 2040 Senior Notes	Fixed	6.34%	2040	800.0		790.5		(3)
$400 Million 5.90% 2020 Senior Notes	Fixed	5.98%	2020	400.0		398.6		(4)
$500 Million 3.95% 2018 Senior Notes	Fixed	4.14%	2018	500.0		497.1		(5)
$1.25 Billion Credit Facility:
Revolving Credit Agreement	Variable	1.87%	2017	1,250.0		—		(6)
Equipment Loans	Fixed	Various	2020	164.8		146.1
Short-Term Borrowing Arrangements			2014/2015	213.2		213.2
Fair Value Adjustment to Interest Rate Hedge						2.9
Total debt				$	4,528.0	$	3,247.2
Less: Short-term and current portion of long-term debt						234.7
Long-term debt						$	3,012.5



($ in Millions)
December 31, 2013
Debt Instrument	Type	Annual Effective Interest Rate	Final Maturity	Total Face Amount		Total Debt
$700 Million 4.875% 2021 Senior Notes	Fixed	4.88%	2021	700.0		699.4			(1)
$1.3 Billion Senior Notes:
$500 Million 4.80% 2020 Senior Notes	Fixed	4.83%	2020	500.0		499.2			(2)
$800 Million 6.25% 2040 Senior Notes	Fixed	6.34%	2040	800.0		790.4			(3)
$400 Million 5.90% 2020 Senior Notes	Fixed	5.98%	2020	400.0		398.4			(4)
$500 Million 3.95% 2018 Senior Notes	Fixed	4.14%	2018	500.0		496.5			(5)
$1.75 Billion Credit Facility:
Revolving Credit Agreement	Variable	1.64%	2017	1,750.0		—			(6)
Equipment Loans	Fixed	Various	2020	164.8		161.7
Fair Value Adjustment to Interest Rate Hedge						(2.1		)
Total debt				$	4,814.8	$	3,043.5
Less: Short-term and current portion of long-term debt						20.9
Long-term debt						$	3,022.6


(1)	As of September 30, 2014 and December 31, 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.


(2)	As of September 30, 2014 and December 31, 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.


(3)	As of September 30, 2014 and December 31, 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.


(4)	As of September 30, 2014 and December 31, 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.


(5)	As of September 30, 2014 and December 31, 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.


(6)	As of September 30, 2014 and December 31, 2013, no revolving loans were drawn under the revolving credit agreement. As of September 30, 2014 and December 31, 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.

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:


•	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.


•	Reducing the size of the existing unsecured facility from $1.75 billion to $1.25 billion.


•	Adding restrictions on the granting of certain pledges and guarantees.


•	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:


•	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.


•	Resetting the minimum interest coverage ratio from 2.5 to 1.0 to the ratio of 3.5 to 1.0.


•	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.


•	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. Per the uncommitted credit agreement, each loan drawn cannot be outstanding less than 30 days or more than 90 days. Interest 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 September 30, 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 September 30, 2014 and December 31, 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 September 30, 2014 in credit for contingent instruments, such as performance bonds. At December 31, 2013, the facility provided A$30.0 million ($26.8 million) in credit for contingent instruments. As of September 30, 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 December 31, 2013, the outstanding bank guarantees under the facility totaled A$23.0 million ($20.5 million), thereby reducing borrowing capacity to A$7.0 million ($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 September 30, 2014:



	(In Millions)
	Maturities of Debt
2014 (October 1 - December 31)	$	218.5
2015	21.8
2016	22.7
2017	23.6
2018	524.7
2019 and thereafter	2,448.0
Total maturities of debt	$	3,259.3

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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