Alcoa 2015 Annual Report Download - page 147

Public Debt—In early 2014, holders of $575 principal amount of Alcoa’s 5.25% Convertible Notes due March 15,
2014 (the “2014 Notes”) exercised their option to convert the 2014 Notes into 89 million shares of Alcoa common
stock. The conversion rate for the 2014 Notes was 155.4908 shares of Alcoa’s common stock per $1,000 (in full
dollars) principal amount of notes, equivalent to a conversion price of $6.43 per share. The difference between the
$575 principal amount of the 2014 Notes and the $89 par value of the issued shares increased Additional capital on the
accompanying Consolidated Balance Sheet. This transaction was not reflected in the accompanying Statement of
Consolidated Cash Flows as it represents a noncash financing activity.
In September 2014, Alcoa completed a public debt offering under its shelf registration statement for $1,250 of 5.125%
Notes due 2024 (the “2024 Notes”). Alcoa received $1,238 in net proceeds from the public debt offering reflecting an
original issue discount. The net proceeds were used, together with the net proceeds of newly issued mandatory
convertible preferred stock (see Note R), to finance the cash portion of the acquisition of Firth Rixson (see Note F).
The original issue discount was deferred and is being amortized to interest expense over the term of the 2024 Notes.
Interest on the 2024 Notes will be paid semi-annually in April and October, commencing April 2015. Alcoa has the
option to redeem the 2024 Notes, as a whole or in part, at any time or from time to time, on at least 30 days, but not
more than 60 days, prior notice to the holders of the 2024 Notes at a redemption price specified in the 2024 Notes. The
2024 Notes are subject to repurchase upon the occurrence of a change in control repurchase event (as defined in the
2024 Notes) at a repurchase price in cash equal to 101% of the aggregate principal amount of the 2024 Notes
repurchased, plus any accrued and unpaid interest on the 2024 Notes repurchased. The 2024 Notes rank pari passu with
Alcoa’s other unsecured unsubordinated indebtedness.
BNDES Loans—Alcoa Alumínio (Alumínio) has a loan agreement with Brazil’s National Bank for Economic and Social
Development (BNDES) that provides for a financing commitment of $397 (R$687), which is divided into three subloans and
was used to pay for certain expenditures of the Estreito hydroelectric power project. Interest on the three subloans is a Brazil
real rate of interest equal to BNDES’ long-term interest rate, 7.00% and 5.00% as of December 31, 2015 and 2014,
respectively, plus a weighted-average margin of 1.48%. Principal and interest are payable monthly, which began in October
2011 and end in September 2029 for two of the subloans totaling R$667 and began in July 2012 and end in June 2018 for the
subloan of R$20. This loan may be repaid early without penalty with the approval of BNDES.
As of December 31, 2015 and 2014, Alumínio’s outstanding borrowings were $136 (R$522) and $209 (R$560),
respectively, and the weighted-average interest rate was 8.49%. During 2015 and 2014, Alumínio repaid $15 (R$48)
and $20 (R$47), respectively, of outstanding borrowings. Additionally, Alumínio borrowed less than $1 (R$1) and $1
(R$2) under the loan in 2015 and 2014, respectively.
Alumínio has another loan agreement with BNDES that provides for a financing commitment of $85 (R$177), which
also was used to pay for certain expenditures of the Estreito hydroelectric power project. Interest on the loan is a Brazil
real rate of interest equal to BNDES’ long-term interest rate plus a margin of 1.55%. Principal and interest are payable
monthly, which began in January 2013 and end in September 2029. This loan may be repaid early without penalty with
the approval of BNDES. As of December 31, 2015 and 2014, Alumínio’s outstanding borrowings were $38 (R146) and
$58 (R$156), respectively, and the interest rate was 6.55%. During 2015 and 2014, Alumínio repaid $3 (R$10) and $5
(R$11), respectively, of outstanding borrowings.
Credit Facilities. On July 25, 2014, Alcoa entered into a Five-Year Revolving Credit Agreement (the “Credit
Agreement”) with a syndicate of lenders and issuers named therein. The Credit Agreement provides a $4,000 senior
unsecured revolving credit facility (the “Credit Facility”), the proceeds of which are to be used to provide working
capital or for other general corporate purposes of Alcoa. Subject to the terms and conditions of the Credit Agreement,
Alcoa may from time to time request increases in lender commitments under the Credit Facility, not to exceed $500 in
aggregate principal amount, and may also request the issuance of letters of credit, subject to a letter of credit sublimit
of $1,000 under the Credit Facility.
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