Alcoa 2009 Annual Report Download - page 114

The First Loans may be repaid early without penalty with the approval of BNDES. Also, the First Loans include a
financial covenant that states that Alcoa must maintain a debt-to-equity ratio of 1.5 or lower.
In June 2008, Alumínio finalized certain documents related to another loan agreement with BNDES. This loan
agreement provides for a commitment of $397 (R$687), which is divided into three subloans, and is being 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 plus a weighted-average margin of 1.48%. Principal and interest are
payable monthly beginning in October 2011 and ending in September 2029 for two of the subloans totaling R$667 and
beginning in January 2011 and ending in December 2016 for the subloan of R$20. This loan may be repaid early
without penalty with the approval of BNDES. As of December 31, 2009 and 2008, Alumínio’s outstanding borrowings
were $300 (R$523) and $100 (R$240) and the weighted-average interest rate was 7.52% and 7.77%, respectively.
Also 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, 2008, $1,500 in senior debt securities were issued
under the current shelf registration statement.
In July 2008, Alcoa completed a public debt offering under its existing shelf registration statement (filed in March
2008) for $1,500 in new notes. The $1,500 is comprised of $750 of 6.00% Notes due 2013 (the “2013 Notes”) and
$750 of 6.75% Notes due 2018 (the “2018 Notes” and, collectively with the 2013 Notes, the “Notes”). Alcoa received
$1,489 in net proceeds from the public debt offering reflecting original issue discounts and the payment of financing
costs. The net proceeds were used for general corporate purposes, including the reduction of outstanding commercial
paper, purchases of outstanding common stock under the stock repurchase program, working capital requirements, and
capital expenditures. The original issue discounts and financing costs were deferred and are being amortized to interest
expense over the respective terms of the Notes. Interest on the Notes is paid semi-annually in January and July, which
commenced in January 2009. Alcoa has the option to redeem the 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 Notes at a redemption price
specified in the Notes. The Notes are subject to repurchase upon the occurrence of a change in control repurchase event
(as defined in the Notes) at a repurchase price in cash equal to 101% of the aggregate principal amount of the Notes
repurchased, plus any accrued and unpaid interest on the Notes repurchased. The Notes rank pari passu with Alcoa’s
other unsecured senior unsubordinated indebtedness.
Also in July 2008, Alcoa entered into $800 of forward starting swaps to hedge interest rates in anticipation of the Notes
issuances. The swaps hedged equal amounts of the 2013 Notes and the 2018 Notes ($400 each). These swaps were
terminated in conjunction with the issuances of the Notes at a loss of $11. This loss is being amortized over the life of
the Notes as additional interest expense.
Commercial Paper. Alcoa had no outstanding commercial paper at December 31, 2009. Outstanding commercial
paper was $1,535 at December 31, 2008. Commercial paper matures at various times within one year and had an
annual weighted average interest rate of 3.1%, 4.0%, and 5.4% during 2009, 2008, and 2007, respectively.
Alcoa maintains a Five-Year Revolving Credit Agreement, dated as of October 2, 2007 (the “Credit Agreement”), with
a syndicate of lenders and issuers named therein. The Credit Agreement provides a $3,250 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, including support of Alcoa’s commercial paper program. 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 sub-limit of $500 under the Credit Facility.
The Credit Facility matures on October 2, 2012, unless extended or earlier terminated in accordance with the
provisions of the Credit Agreement. Alcoa may make two one-year extension requests during the term of the Credit
Facility, with any extension being subject to the lender consent requirements set forth in the Credit Agreement.
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