Alcoa 2011 Annual Report Download - page 117

In April 2011, Alcoa completed a public debt offering under its existing shelf registration statement (dated
February 18, 2011) for $1,250 of 5.40% Notes due 2021 (the “2021 Notes”). Alcoa received $1,241 in net proceeds
from the public debt offering reflecting an original issue discount and payment of financing costs. The net proceeds
were used for the early retirement of $881 in outstanding notes (see below), early repayment of $101 in outstanding
loans related to the bauxite mine development in Brazil (see BNDES Loans below), and the remainder was used for
general corporate purposes. The original issue discount and financing costs were deferred and are being amortized to
interest expense over the term of the 2021 Notes. Interest on the 2021 Notes is paid semi-annually in April and
October, which commenced in October 2011. Alcoa has the option to redeem the 2021 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 2021
Notes at a redemption price specified in the 2021 Notes. The 2021 Notes are subject to repurchase upon the occurrence
of a change in control repurchase event (as defined in the 2021 Notes) at a repurchase price in cash equal to 101% of
the aggregate principal amount of the 2021 Notes repurchased, plus any accrued and unpaid interest on the 2021 Notes
repurchased. The 2021 Notes rank pari passu with Alcoa’s other unsecured senior unsubordinated indebtedness.
In May 2011, Alcoa completed the following tender offers: (i) any and all of its 5.375% Notes due 2013 (the “5.375%
Notes”) and (ii) up to $400 of its 6.00% Notes due 2013 (the “6.00% Notes” and collectively with the 5.375% Notes,
the “Notes”). Upon expiration of the tender offers, $269 and $328 of the aggregate outstanding principal amount of the
5.375% Notes and 6.00% Notes, respectively, were validly tendered and accepted. Additionally in May 2011,
subsequent to the expiration of the tender offer for the 5.375% Notes, Alcoa elected to call for redemption the
remaining outstanding principal of $284 under the provisions of the 5.375% Notes. The total cash paid to the holders of
the tendered 5.375% Notes and 6.00% Notes and the called 5.375% Notes was $972, which consisted of $881 in debt
principal, $74 in purchase premiums, and $17 in accrued and unpaid interest from the respective last interest payment
dates up to, but not including, the respective settlement dates. The $74 was recorded in Interest expense on the
accompanying Statement of Consolidated Operations. At December 31, 2011, the 6.00% Notes had a remaining
outstanding principal of $422.
In conjunction with the early retirement of the 5.375% Notes, Alcoa terminated interest rate swaps with a notional
amount totaling $550. These swaps were accounted for as fair value hedges and were used to convert the stated interest
rate of the 5.375% Notes from fixed to floating. At the time of termination, the swaps were “in-the-money” resulting in
a gain of $33, which was recorded in Interest expense on the accompanying Statement of Consolidated Operations.
On August 1, 2010, Alcoa repaid the $511 in outstanding principal of its 7.375% Notes as scheduled using available
cash on hand.
In August 2010, Alcoa completed a public debt offering under its then-existing shelf registration statement for $1,000
of 6.150% Notes due 2020 (the “2020 Notes”). Alcoa received $993 in net proceeds from the public debt offering
reflecting an original issue discount and payment of financing costs. The net proceeds were used for the early
retirement of $825 in outstanding notes (see below), early repayment of $88 in outstanding loans related to the refinery
expansion and bauxite mine development in Brazil (see BNDES Loans below), and the remainder was for the
repayment of other outstanding debt. The original issue discount and financing costs were deferred and are being
amortized to interest expense over the term of the 2020 Notes. Interest on the 2020 Notes is paid semi-annually in
February and August, which commenced February 2011. Alcoa has the option to redeem the 2020 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 2020 Notes at a redemption price specified in the 2020 Notes. The 2020 Notes are subject to repurchase upon the
occurrence of a change in control repurchase event (as defined in the 2020 Notes) at a repurchase price in cash equal to
101% of the aggregate principal amount of the 2020 Notes repurchased, plus any accrued and unpaid interest on the
2020 Notes repurchased. The 2020 Notes rank pari passu with Alcoa’s other unsecured senior unsubordinated
indebtedness.
Also in August 2010, Alcoa completed the following tender offers: (i) any and all of its 6.50% Notes due 2011 (the
“2011 Notes”) and (ii) an amount of its 6.00% Notes due 2012 (the “2012 Notes”) and its 5.375% Notes not to exceed
the difference between $750 and the purchase price of the 2011 Notes accepted for purchase, provided that the
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