Alcoa 2009 Annual Report Download - page 70

The Credit Agreement includes the following covenants, among others, (a) a leverage ratio, (b) limitations on Alcoa’s
ability to incur liens securing indebtedness for borrowed money, (c) limitations on Alcoa’s ability to consummate a
merger, consolidation or sale of all or substantially all of its assets, and (d) limitations on Alcoa’s ability to change the
nature of its business.
The obligation of Alcoa to pay amounts outstanding under the Credit Facility may be accelerated upon the occurrence
of an “Event of Default” as defined in the Credit Agreement. Such Events of Default include, among others,
(a) Alcoa’s failure to pay the principal of, or interest on, borrowings under the Credit Facility, (b) any representation or
warranty of Alcoa in the Credit Agreement proving to be materially false or misleading, (c) Alcoa’s breach of any of its
covenants contained in the Credit Agreement, and (d) the bankruptcy or insolvency of Alcoa.
In July 2008, Alcoa increased the capacity of the Credit Facility by $175 as provided for under the Credit Agreement.
In October 2008, Lehman Commercial Paper Inc. (LCPI), a lender under the Credit Agreement with $150 in
commitments, filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code. It is not certain
if LCPI will honor its obligations under the Credit Agreement. The total capacity of the Credit Facility, excluding
LCPI’s commitment, is $3,275.
There were no amounts outstanding under the Credit Facility at December 31, 2009 and 2008.
In January 2008, Alcoa entered into a Revolving Credit Agreement (RCA-1) with two financial institutions. RCA-1
provided a $1,000 senior unsecured revolving credit facility (RCF-1), with a stated maturity of March 28, 2008. RCA-1
contained a provision that if there were amounts borrowed under RCF-1 at the time Alcoa received the proceeds from
the sale of the Packaging and Consumer businesses, the company must use the net cash proceeds to prepay the amount
outstanding under RCF-1. Additionally, upon Alcoa’s receipt of such proceeds, the lenders’ commitments under RCF-1
would be reduced by a corresponding amount, up to the total commitments then in effect under RCF-1, regardless of
whether there was an amount outstanding under RCF-1. In February 2008, Alcoa borrowed $1,000 under RCF-1 and
used the proceeds to reduce outstanding commercial paper and for general corporate purposes. Subsequent to the
$1,000 borrowing, Alcoa completed the sale of its Packaging and Consumer businesses in February 2008. As a result,
Alcoa also repaid the $1,000 under RCF-1 in February 2008, and the lenders’ commitments under RCF-1 were reduced
to zero effectively terminating RCA-1.
Also in January 2008, Alcoa entered into a Revolving Credit Agreement (RCA-2) with LCPI, as administrative agent,
and Lehman Brothers Commercial Bank (LBCB), as lender. RCA-2 provided a $1,000 senior unsecured revolving
credit facility (RCF-2), which would have matured on January 31, 2009. In October 2008, LCPI filed for bankruptcy
protection under section 11 of the United States Bankruptcy Code. As a result, in October 2008, Alcoa gave notice in
accordance with the provisions of RCA-2 to permanently terminate in whole LBCB’s total commitments under RCF-2
effective October 30, 2008. To Alcoa’s knowledge, LBCB did not file for bankruptcy protection.
On October 14, 2008, Alcoa entered into a Revolving Credit Agreement (RCA-3) with a syndicate of lenders. RCA-3
provided a $1,150 senior unsecured revolving credit facility (RCF-3), which matured on October 12, 2009. In October
and November 2008, Alcoa increased the capacity of RCF-3 by $500 and $250, respectively, as provided for under
RCA-3. Alcoa paid a total of $43 in financing costs, which were deferred and amortized to interest expense over the
term of the facility, for the initial capacity under RCF-3 and for the $750 in increased capacity. In early 2009, Alcoa
borrowed $1,300 under RCF-3 to support its operations during the global economic downturn. The $1,300 was repaid
on March 24, 2009 with the net proceeds from the issuance of convertible notes and common stock. There were no
amounts outstanding under RCF-3 at December 31, 2008.
In March 2008, Alcoa filed an automatic shelf registration statement with the Securities and Exchange Commission for
an indeterminate amount of securities for future issuance. This shelf registration statement replaced Alcoa’s existing
shelf registration statement. As of December 31, 2009 and 2008, $2,075 and $1,500, respectively, in senior debt
securities were issued under the current shelf registration statement.
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