Alcoa 2015 Annual Report Download - page 148

The Credit Facility was scheduled to mature on July 25, 2019; however, on July 7, 2015, Alcoa received approval for a
one-year extension of the maturity date by the lenders and issuers that support the Credit Facility. As such, the Credit
Facility now matures on July 25, 2020, unless extended or earlier terminated in accordance with the provisions of the
Credit Agreement. Alcoa may make one additional one-year extension request during the remaining term of the Credit
Facility, subject to the lender consent requirements set forth in the Credit Agreement. Under the provisions of the
Credit Agreement, Alcoa will pay a fee of 0.25% (based on Alcoa’s long-term debt ratings as of December 31, 2015)
of the total commitment per annum to maintain the Credit Facility.
The Credit Facility is unsecured and amounts payable under it will rank pari passu with all other unsecured,
unsubordinated indebtedness of Alcoa. Borrowings under the Credit Facility may be denominated in U.S. dollars or
euros. Loans will bear interest at a base rate or a rate equal to LIBOR, plus, in each case, an applicable margin based on
the credit ratings of Alcoa’s outstanding senior unsecured long-term debt. The applicable margin on base rate loans and
LIBOR loans will be 0.50% and 1.50% per annum, respectively, based on Alcoa’s long-term debt ratings as of
December 31, 2015. Loans may be prepaid without premium or penalty, subject to customary breakage costs.
The Credit Agreement replaces Alcoa’s Five-Year Revolving Credit Agreement, dated as of July 25, 2011 (the
“Former Credit Agreement”), which was scheduled to mature on July 25, 2017. The Former Credit Agreement, which
had a total capacity of $3,750 and was undrawn, was terminated effective July 25, 2014.
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, 2015, 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, 2015 and 2014 and no amounts were borrowed during 2015 or 2014
under the Credit Facility. Also, there were no amounts borrowed during 2014 related to the Former Credit Agreement.
In addition to the Credit Agreement above, Alcoa has a number of other credit agreements that provide a combined borrowing
capacity of $990 as of December 31, 2015, of which $890 is due to expire in 2016 and $100 is due to expire in 2017. The
purpose of any borrowings under these credit arrangements is to provide for working capital requirements and for other general
corporate purposes. The covenants contained in all these arrangements are the same as the Credit Agreement (see above).
In 2015 and 2014, Alcoa borrowed and repaid $1,890 and $1,640, respectively, under the respective credit arrangements.
The weighted-average interest rate and weighted-average days outstanding of the respective borrowings during 2015,
2014, and 2013 were 1.61%, 1.54%, and 1.57%, respectively, and 69 days, 67 days, and 213 days, respectively.
Short-Term Borrowings. At December 31, 2015 and 2014, Short-term borrowings were $38 and $54, respectively.
These amounts included $32 and $50 at December 31, 2015 and 2014, 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 in Interest expense on the accompanying Statement of Consolidated Operations.
Commercial Paper. Alcoa had no outstanding commercial paper at December 31, 2015 and 2014. In 2015 and 2014, the
average outstanding commercial paper was $198 and $257, respectively. Commercial paper matures at various times within one
year and had an annual weighted average interest rate of 0.6%, 0.6%, and 0.8% during 2015, 2014, and 2013, respectively.
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