Alcoa 2011 Annual Report Download - page 118

purchase of the 5.375% Notes was subject to an aggregate purchase sublimit of $50. Upon expiration of the tender
offers, $253, $195, and $47 of the aggregate outstanding principal amount of the 2011 Notes, 2012 Notes, and 5.375%
Notes, respectively, were validly tendered and accepted. Additionally in August 2010, subsequent to the expiration of
the tender offer for the 2011 Notes, Alcoa elected to call for redemption the remaining outstanding principal of $330
under the provisions of the 2011 Notes. The total cash paid to the holders of the tendered 2011 Notes, 2012 Notes, and
5.375% Notes and the called 2011 Notes was $878, which consisted of $825 in debt principal, $42 in purchase
premiums, and $11 in accrued and unpaid interest from the respective last interest payment dates up to, but not
including, the respective settlement dates. The $42 was recorded in Interest expense on the accompanying Statement of
Consolidated Operations. At December 31, 2010, the 2012 Notes and 5.375% Notes had a remaining outstanding
principal of $322 and $553, respectively.
In conjunction with the early retirement of the 2011 Notes and a portion of both the 2012 Notes and 5.375% Notes,
Alcoa terminated all or a portion of various interest rate swaps with a notional amount totaling $825 (equivalent to the
debt principal retired). These swaps were accounted for as fair value hedges and were used to convert the stated interest
rates of the 2011 Notes, 2012 Notes, and 5.375% Notes from fixed to floating. At the time of termination, the swaps
were “in-the-money” resulting in a gain of $28, which was recorded in Interest expense on the accompanying
Statement of Consolidated Operations. At December 31, 2010, the 2012 Notes and 5.375% Notes had outstanding
interest rate swaps with a remaining notional amount of $315 and $550, respectively.
BNDES Loans—In March 2008, Alcoa Alumínio (Alumínio) entered into two separate loan agreements (the “First
Loans”) with Brazil’s National Bank for Economic and Social Development (BNDES) related to the Juruti bauxite
mine development and the São Luís refinery expansion.
The first loan agreement provides for a commitment of $248 (R$500), which is divided into five subloans, and was
used to pay for certain expenditures of the Juruti bauxite mine development. Interest on four of the subloans totaling
$233 (R$470) is a Brazil real rate of interest equal to BNDES’ long-term interest rate, 6.00% as of December 31, 2011
and 2010, plus a weighted-average margin of 2.13%. Interest on the fifth subloan of $15 (R$30) is a U.S. dollar rate of
interest equal to the average cost incurred by BNDES in raising capital outside of Brazil, 3.59% and 4.16% as of
December 31, 2011 and 2010, respectively, plus a margin of 2.40%.
Principal and interest were payable monthly beginning in September 2009 and ending in November 2014 for the four
subloans totaling $233 (R$470) and beginning in November 2009 and ending in January 2015 for the subloan of $15
(R$30). Prior to these dates, interest was payable quarterly on borrowed amounts.
As of December 31, 2011, Alumínio’s outstanding borrowings were $55 (R$102) and $3 (R$7) and the weighted-
average interest rate was 8.13% and 5.99% for the subloans totaling $233 (R$470) and the subloan of $15 (R$30),
respectively. During 2011, Alumínio repaid $131 (R$209) and $7 (R$11) of outstanding borrowings related to the
subloans totaling $233 (R$470) and the subloan of $15 (R$30), respectively. As of December 31, 2010, Alumínio’s
outstanding borrowings were $186 (R$312) and $10 (R$17) and the weighted-average interest rate was 8.13% and
6.56% for the subloans totaling $233 (R$470) and the subloan of $15 (R$30), respectively. During 2010, Alumínio
repaid $75 (R$130) and $4 (R$8) of outstanding borrowings related to the subloans totaling $233 (R$470) and the
subloan of $15 (R$30), respectively.
The second loan agreement provides for a commitment of $374 (R$650), which is divided into three subloans, and was
used to pay for certain expenditures of the São Luís refinery expansion. Interest on two of the subloans totaling $339
(R$589) is a Brazil real rate of interest equal to BNDES’ long-term interest rate plus a weighted-average margin of
1.99%. Interest on the third subloan of $35 (R$61) is a U.S. dollar rate of interest equal to the average cost incurred by
BNDES in raising capital outside of Brazil plus a margin of 2.02%.
Principal and interest were payable monthly beginning in December 2009 and ending in February 2015 for the two
subloans totaling $339 (R$589) and beginning in February 2010 and ending in April 2015 for the subloan of $35
(R$61). Prior to these dates, interest was payable quarterly on borrowed amounts.
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