Alcoa 2012 Annual Report Download - page 124

total capacity (excluding the commitment of Lehman Commercial Paper Inc.) of $3,275 and was undrawn, was
terminated effective July 25, 2011.
The Credit Agreement includes covenants substantially similar to those in the Former Credit Agreement, including,
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. As of December 31, 2012 and 2011,
Alcoa was in compliance with all such covenants.
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.
There were no amounts outstanding at December 31, 2012 and 2011 and no amounts were borrowed during 2012 or
2011 under the Credit Facility.
Short-Term Borrowings. At December 31, 2012 and 2011, Short-term borrowings were $53 and $62, respectively.
These amounts included $48 and $53 at December 31, 2012 and 2011, respectively, related to accounts payable
settlement arrangements with certain vendors and third-party intermediaries. These arrangements provide that, at the
vendor’s request, the third-party intermediary advances the amount of the scheduled payment to the vendor, less an
appropriate discount, before the scheduled payment date and Alcoa makes payment to the third-party intermediary on
the date stipulated in accordance with the commercial terms negotiated with its vendors. Alcoa records imputed interest
related to these arrangements as interest expense in the Statement of Consolidated Operations.
In January 2012, Alcoa entered into two term loan agreements, totaling $350, with two separate financial institutions.
Additionally, throughout 2012, Alcoa entered into six revolving credit agreements, providing a combined $640 in
credit facilities, with six different financial institutions. The purpose of any borrowings under all eight arrangements
will be to provide working capital and for other general corporate purposes, including contributions to Alcoa’s pension
plans ($561 was contributed in 2012).
The two term loans were fully drawn on the same dates as the agreements and were subject to an interest rate
equivalent to the 1-month LIBOR (changed from the 3-month LIBOR in April 2012) plus a 1.5% margin. A $150 term
loan was repaid between October and November 2012 and a $200 term loan was repaid in December 2012, effectively
terminating both agreements. In February 2012, Alcoa fully borrowed $100 under one of the credit facilities, which
was repaid in August 2012. This borrowing was subject to an interest rate equivalent to the 6-month LIBOR plus a
1.25% margin. In July 2012, Alcoa fully borrowed $150 under one of the credit facilities, which was repaid in
December 2012. This borrowing was subject to an interest rate equivalent to the 3-month LIBOR plus a 1.375%
margin.
The six revolving credit facilities expire as follows: $150 in March 2013; $100 in September 2013 (originally
December 2012, extended in September 2012); $100 in September 2013; $140 in October 2013; $100 in December
2013 (originally December 2012, extended in December 2012); and $50 in December 2015. The covenants contained
in all eight arrangements are the same as the Credit Agreement (see the Commercial Paper section above).
During 2012, Alcoa’s subsidiary, Alumínio, borrowed and repaid a total of $280 in new loans with a weighted-average
interest rate of 2.32% and a weighted-average maturity of 172 days from two financial institutions. The purpose of
these borrowings was to support Alumínio’s export operations.
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