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, 2012

Debt Disclosure [Abstract]

DEBT AND CREDIT FACILITIES

NOTE 10 - DEBT AND CREDIT FACILITIES

The following represents a summary of our long-term debt as of September 30, 2012 and December 31, 2011:



($ in Millions)
September 30, 2012
Debt Instrument	Type	Annual Effective Interest Rate	Final Maturity	Total Face Amount			Total Debt
$1.25 Billion Term Loan	Variable	1.60%	2016	$	922.1	(1)	$	922.1	(1)
$700 Million 4.875% 2021 Senior Notes	Fixed	4.88%	2021	700.0			699.4		(2)
$1.3 Billion Senior Notes:
$500 Million 4.80% 2020 Senior Notes	Fixed	4.80%	2020	500.0			499.1		(3)
$800 Million 6.25% 2040 Senior Notes	Fixed	6.25%	2040	800.0			790.2		(4)
$400 Million 5.90% 2020 Senior Notes	Fixed	5.90%	2020	400.0			398.2		(5)
$325 Million Private Placement Senior Notes:
Series 2008A - Tranche A	Fixed	6.31%	2013	270.0			270.0
Series 2008A - Tranche B	Fixed	6.59%	2015	55.0			55.0
$1.75 Billion Credit Facility:
Revolving Loan	Variable	1.47%	2016	1,750.0			250.0		(6)
Total debt				$	5,397.1		$	3,884.0
Less current portion							369.7
Long-term debt							$	3,514.3



($ in Millions)
December 31, 2011
Debt Instrument	Type	Annual Effective Interest Rate	Final Maturity	Total Face Amount			Total Debt
$1.25 Billion Term Loan	Variable	1.40%	2016	$	972.0	(1)	$	972.0	(1)
$700 Million 4.875% 2021 Senior Notes	Fixed	4.88%	2021	700.0			699.3		(2)
$1.3 Billion Senior Notes:
$500 Million 4.80% 2020 Senior Notes	Fixed	4.80%	2020	500.0			499.1		(3)
$800 Million 6.25% 2040 Senior Notes	Fixed	6.25%	2040	800.0			790.1		(4)
$400 Million 5.90% 2020 Senior Notes	Fixed	5.90%	2020	400.0			398.0		(5)
$325 Million Private Placement Senior Notes:
Series 2008A - Tranche A	Fixed	6.31%	2013	270.0			270.0
Series 2008A - Tranche B	Fixed	6.59%	2015	55.0			55.0
$1.75 Billion Credit Facility:
Revolving Loan	Variable	—%	2016	1,750.0			—		(6)
Total debt				$	5,447.0		$	3,683.5
Less current portion							74.8
Long-term debt							$	3,608.7

(1)

As of September 30, 2012 and December 31, 2011, $327.9 million and $278.0 million, respectively, had been paid down on the original $1.25 billion term loan and, of the remaining term loan, $99.7 million and $74.8 million, respectively, was classified as Current portion of debt. The current classification is 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 September 30, 2012 and December 31, 2011, the $700 million 4.88 percent senior notes were recorded at a par value of $700 million less unamortized discounts of $0.6 million and $0.7 million, respectively, based on an imputed interest rate of 4.89 percent.


(3)	As of September 30, 2012 and December 31, 2011, the $500 million 4.80 percent senior notes were recorded at a par value of $500 million less unamortized discounts of $0.9 million and $0.9 million, respectively, based on an imputed interest rate of 4.83 percent.


(4)	As of September 30, 2012 and December 31, 2011, the $800 million 6.25 percent senior notes were recorded at par value of $800 million less unamortized discounts of $9.8 million and $9.9 million, respectively, based on an imputed interest rate of 6.38 percent.


(5)	As of September 30, 2012 and December 31, 2011, the $400 million 5.90 percent senior notes were recorded at a par value of $400 million less unamortized discounts of $1.8 million and $2.0 million, respectively, based on an imputed interest rate of 5.98 percent.


(6)	As of September 30, 2012 and December 31, 2011, $250.0 million and no revolving loans were drawn under the credit facility, respectively, and the principal amount of letter of credit obligations totaled $23.1 million and $23.5 million for each period, respectively, thereby reducing available borrowing capacity to $1.48 billion and $1.73 billion for each period, respectively.

The terms of the private placement senior notes, term loan and credit facility each contain customary covenants that require compliance with certain financial covenants based on: (1) debt to earnings ratio (Total Funded Debt to EBITDA, as those terms are defined in the credit agreement, as of the last day of each fiscal quarter cannot exceed (i) 3.5 to 1.0, if none of the $270 million private placement senior notes due 2013 remain outstanding, or otherwise (ii) the then applicable maximum multiple under the $270 million private placement senior notes due 2013) and (2) interest 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 of September 30, 2012 and December 31, 2011, we were in compliance with the financial covenants related to both the private placement senior notes and the credit facilities. The terms of the senior notes due in 2020, 2021 and 2040 contain certain customary covenants; however, there are no financial covenants.

Short-term Facilities

Asia Pacific Iron Ore maintains a bank contingent instrument facility and cash advance facility. The facility, which is renewable annually at the bank’s discretion, provides A$40.0 million ($41.5 million) 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 September 30, 2012, the outstanding bank guarantees under this facility totaled A$24.9 million ($25.8 million), thereby reducing borrowing capacity to A$15.1 million ($15.7 million). We have provided a guarantee of the facility, along with certain of our Australian subsidiaries. During the third quarter of 2012, the agreement was amended to eliminate the customary covenants that were required. Prior to this amendment, the facility agreement contained certain customary covenants that require compliance with certain financial covenants: (1) debt to earnings ratio and (2) interest coverage ratio, both based on the financial performance of the Company. As of December 31, 2011, we were in compliance with these 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 September 30, 2012 and December 31, 2011, these letter of credit obligations totaled $97.6 million and $95.0 million, respectively. All of these standby letters of credit are in addition to the letters of credit provided for under the amended and restated multicurrency credit agreement.

Debt Maturities

Maturities of debt instruments, excluding borrowings on the revolving credit facility, based on the principal amounts outstanding at September 30, 2012, total approximately $24.9 million in 2012, $369.7 million in 2013, $124.6 million in 2014, $428.8 million in 2015, $299.1 million in 2016 and $2.4 billion thereafter.

- 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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