Alcoa 2010 Annual Report Download - page 114

If Alcoa undergoes a fundamental change, as defined in the convertible notes, holders may require the Company to
repurchase all or a portion of their notes at a price equal to 100% of the principal amount of the notes to be purchased
plus any accrued and unpaid interest up to, but excluding, the repurchase date. Such a repurchase will be made in cash.
The convertible notes are general unsecured obligations and rank senior in right of payment to any of Alcoa’s future
indebtedness that is expressly subordinated in right of payment to the convertible notes and equally in right of payment
with all of Alcoa’s existing and future unsecured indebtedness and liabilities that are not so subordinated. The
convertible notes effectively rank junior to any secured indebtedness of Alcoa to the extent of the value of the assets
securing such indebtedness, and are effectively subordinated to all debt and other liabilities of Alcoa’s subsidiaries.
The net proceeds from the convertible notes ($562) and the issuance of common stock (see Note R) were used to
prepay the $1,300 outstanding under Alcoa’s 364-day revolving credit facility (see Short-Term Borrowings below).
The remaining net proceeds were used for general corporate purposes.
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, 2010 and 2009, $3,075 and $2,075, respectively, in senior debt
securities were issued under the current shelf registration statement.
BNDES Loans—In May 2009, Alumínio entered into two new loan agreements (the “Second Loans”) with BNDES
(Brazil’s National Bank for Economic and Social Development) related to the Juruti bauxite mine development and the
São Luís refinery expansion.
The first loan agreement provided for a commitment of $321 (R$750), which was divided into six subloans, and was
used to pay for certain expenditures of the Juruti bauxite mine development. Interest on two of the subloans totaling
$257 (R$600) was a U.S. dollar rate of interest equal to the average cost incurred by BNDES in raising capital outside
of Brazil, 4.16% and 4.25% as of December 31, 2010 and 2009, respectively, plus a weighted-average margin of
1.69%. Interest on four of the subloans totaling $64 (R$150) was a Brazil real rate of interest equal to BNDES’ long-
term interest rate, 6.00% as of December 31, 2010 and 2009, plus a weighted-average margin of 1.59%. As of
December 31, 2010, Alumínio had no outstanding borrowings under any of the subloans. During 2010, Alumínio
repaid early $70 (R$123) and $23 (R$41) of outstanding borrowings related to the subloans totaling $257 (R$600) and
the subloans totaling $64 (R$150), respectively. As of December 31, 2009, Alumínio’s outstanding borrowings were
$70 (R$122) and $24 (R$41) and the weighted-average interest rate was 5.94% and 7.59% for the subloans totaling
$257 (R$600) and the subloans totaling $64 (R$150), respectively. During 2009, Alumínio repaid early $56 (R$97) and
$19 (R$33) of outstanding borrowings related to the subloans totaling $257 (R$600) and the subloans totaling $64
(R$150), respectively.
The second loan agreement provided for a commitment of $86 (R$200), which was divided into four subloans, and was
used to pay for certain expenditures of the São Luís refinery expansion. Interest on two of the subloans totaling $69
(R$160) was a U.S. dollar rate of interest equal to the average cost incurred by BNDES in raising capital outside of
Brazil plus a weighted-average margin of 1.70%. Interest on two of the subloans totaling $17 (R$40) was a Brazil real
rate of interest equal to BNDES’ long-term interest rate plus a weighted-average margin of 1.70%. As of December 31,
2010, Alumínio had no outstanding borrowings under any of the subloans. During 2010, Alumínio repaid early $33
(R$57) and $12 (R$19) of outstanding borrowings related to the subloans totaling $69 (R$160) and the subloans
totaling $17 (R$40), respectively. As of December 31, 2009, Alumínio’s outstanding borrowings were $33 (R$58) and
$11 (R$19) and the weighted-average interest rate was 5.95% and 7.70% for the subloans totaling $69 (R$160) and the
subloans totaling $17 (R$40), respectively.
Principal and interest on the Second Loans were payable monthly beginning in November 2010 and ending in April
2016. Prior to November 2010, interest was payable quarterly on borrowed amounts. The Second Loans were repaid
early without penalty under the approval of BNDES.
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