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

6 Months Ended

Jun. 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 June 30, 2014 and December 31, 2013:



($ in Millions)
June 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		398.5		(4)
$500 Million 3.95% 2018 Senior Notes	Fixed	4.14%	2018	500.0		496.9		(5)
$1.75 Billion Credit Facility:
Revolving Loan	Variable	1.66%	2017	1,750.0		275.0		(6)
Equipment Loans	Fixed	Various	2020	164.8		151.4
Short-Term Borrowing Arrangements			2014/2015	139.7		139.7
Fair Value Adjustment to Interest Rate Hedge						3.3
Total debt				$	4,954.5	$	3,454.1
Less: Short-term and current portion of long-term debt						161.1
Long-term debt						$	3,293.0



($ 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 Loan	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 June 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 June 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 June 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 June 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 $1.5 million and $1.6 million, respectively, based on an imputed interest rate of 5.98 percent.


(5)	As of June 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 $3.1 million and $3.5 million, respectively, based on an imputed interest rate of 4.14 percent.

(6)

As of June 30, 2014, $275.0 million of revolving loans were drawn under the credit facility. As of December 31, 2013, no revolving loans were drawn under the credit facility. As of June 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 $1.5 billion and $1.7 billion for each period, respectively.

Credit Facility

On June 30, 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 and Amendment No. 2 as of February 8, 2013), or 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.

The new amended revolving credit agreement terms are effective June 30, 2014, and remain in effect for the life of the revolving credit agreement. This amended revolving credit agreement allows our borrowing capacity to be less susceptible to the impact of volatile iron ore and metallurgical coal pricing.

As of June 30, 2014, we were in compliance with these financial covenants. 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 June 30, 2014, we had outstanding borrowings of $45.0 million on an uncommitted credit facility agreement which was 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 million of funding and expires on April 21, 2015. Availability under this facility is based on eligible receivable balances. At June 30, 2014, the amounts available and utilized under this program totaled $57.3 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.

As of June 30, 2014, we had outstanding borrowings of $37.4 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 June 30, 2014 and December 31, 2013, these letter of credit obligations totaled $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 ($28.3 million) at June 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 June 30, 2014, the outstanding bank guarantees under the facility totaled A$23.0 million ($21.7 million), thereby reducing borrowing capacity to A$7.0 million ($6.6 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 June 30, 2014:



	(In Millions)
	Maturities of Debt
2014 (July 1 - December 31)	$	150.4
2015	21.8
2016	22.7
2017	23.6
2018	524.6
2019 and thereafter	2,448.0
Total maturities of debt	$	3,191.1

- 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.

+ References + Details