Alcoa 2012 Annual Report Download - page 122

In conjunction with the early retirement of the 5.375% Notes, Alcoa terminated interest rate swaps with a notional
amount totaling $550. These swaps were accounted for as fair value hedges and were used to convert the stated interest
rate of the 5.375% Notes from fixed to floating. At the time of termination, the swaps were “in-the-money” resulting in
a gain of $33, which was recorded in Interest expense on the accompanying Statement of Consolidated Operations.
BNDES Loans—In March 2008, Alcoa Alumínio (Alumínio) entered into two separate loan agreements (the “First
Loans”) with Brazil’s National Bank for Economic and Social Development (BNDES) related to the Juruti bauxite
mine development and the São Luís refinery expansion.
The first loan agreement provides for a commitment of $248 (R$500), which is divided into five subloans, and was
used to pay for certain expenditures of the Juruti bauxite mine development. Interest on four of the subloans totaling
$233 (R$470) is a Brazil real rate of interest equal to BNDES’ long-term interest rate, 5.00% and 6.00% as of
December 31, 2012 and 2011, respectively, plus a weighted-average margin of 2.13%. Interest on the fifth subloan of
$15 (R$30) is a U.S. dollar rate of interest equal to the average cost incurred by BNDES in raising capital outside of
Brazil, 3.56% and 3.59% as of December 31, 2012 and 2011, respectively, plus a margin of 2.40%.
Principal and interest were payable monthly beginning in September 2009 and ending in November 2014 for the four
subloans totaling $233 (R$470) and beginning in November 2009 and ending in January 2015 for the subloan of $15
(R$30). Prior to these dates, interest was payable quarterly on borrowed amounts.
As of December 31, 2012, Alumínio had no outstanding borrowings under any of the subloans. During 2012, Alumínio
repaid $51 (R$102) and $3 (R$7) of outstanding borrowings related to the subloans totaling $233 (R$470) and the
subloan of $15 (R$30), respectively.
As of December 31, 2011, Alumínio’s outstanding borrowings were $55 (R$102) and $3 (R$7) and the weighted-
average interest rate was 8.13% and 5.99% for the subloans totaling $233 (R$470) and the subloan of $15 (R$30),
respectively. During 2011, Alumínio repaid $131 (R$209) and $7 (R$11) of outstanding borrowings related to the
subloans totaling $233 (R$470) and the subloan of $15 (R$30), respectively.
The second loan agreement provides for a commitment of $374 (R$650), which is divided into three subloans, and was
used to pay for certain expenditures of the São Luís refinery expansion. Interest on two of the subloans totaling $339
(R$589) is a Brazil real rate of interest equal to BNDES’ long-term interest rate plus a weighted-average margin of
1.99%. Interest on the third subloan of $35 (R$61) is a U.S. dollar rate of interest equal to the average cost incurred by
BNDES in raising capital outside of Brazil plus a margin of 2.02%.
Principal and interest were payable monthly beginning in December 2009 and ending in February 2015 for the two
subloans totaling $339 (R$589) and beginning in February 2010 and ending in April 2015 for the subloan of $35
(R$61). Prior to these dates, interest was payable quarterly on borrowed amounts.
As of December 31, 2012, Alumínio had no outstanding borrowings under any of the subloans. During 2012, Alumínio
repaid $176 (R$356) and $22 (R$46) of outstanding borrowings related to the subloans totaling $339 (R$589) and the
subloan of $35 (R$61), respectively.
As of December 31, 2011, Alumínio’s outstanding borrowings were $191 (R$356) and $23 (R$42) and the weighted-
average interest rate was 7.99% and 5.61% for the subloans totaling $339 (R$589) and the subloan of $35 (R$61),
respectively. During 2011, Alumínio repaid $67 (R$113) and $7 (R$11) of outstanding borrowings related to the
subloans totaling $339 (R$589) and the subloan of $35 (R$61), respectively.
The First Loans were repaid early without penalty under the approval of BNDES. With the full repayment of the First
Loans, the commitments were effectively terminated.
111