Alcoa 2011 Annual Report Download - page 120

On July 25, 2011, Alcoa entered into a Five-Year Revolving Credit Agreement (the “Credit Agreement”) with a
syndicate of lenders and issuers named therein. The Credit Agreement provides a $3,750 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 sublimit of $1,000 under the Credit Facility.
The Credit Facility matures on July 25, 2016, 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. 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,
2011) 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, 2011. Loans may be prepaid without premium or penalty, subject to customary breakage costs.
The Credit Facility replaces Alcoa’s Five-Year Revolving Credit Agreement, dated as of October 2, 2007 (the “Former
Credit Agreement”), which was scheduled to mature on October 2, 2012. The Former Credit Agreement, which had a
total capacity (excluding the commitment of Lehman Commercial Paper Inc.) of $3,275 and was undrawn, was
terminated effective July 25, 2011.
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, 2011, 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, 2011 and no amounts were borrowed during 2011 under the
Credit Facility. There were no amounts outstanding at December 31, 2010 and no amounts were borrowed during 2011
and 2010 under the Former Credit Agreement.
Short-Term Borrowings. At December 31, 2011 and 2010, Short-term borrowings were $62 and $92, respectively
(see Note Y). These amounts included $53 and $56 at December 31, 2011 and 2010, 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 as interest expense in the Statement of Consolidated Operations. The remaining
amount of short-term borrowings represents working capital loans for various subsidiaries.
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