Freeport-McMoRan 2014 Annual Report Download - page 101

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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Term Loan agreement) plus a spread determined by reference
to FCX’s credit ratings (effective February 11, 2015, LIBOR plus
1.75 percent or ABR plus 0.75 percent; previously LIBOR plus
1.50 percent or ABR plus 0.50 percent). The effective interest rate
on the Term Loan was 1.67 percent at December 31, 2014. In
February 2015, the Term Loan was amended (refer to Note 18 for
further discussion).
Revolving Credit Facility. In May 2014, FCX, PT-FI and FM O&G
LLC amended the senior unsecured $3.0 billion revolving credit
facility to extend the maturity date one year to May 31, 2019, and
increase the aggregate facility amount from $3.0 billion to
$4.0 billion, with $500 million available to PT-FI. FCX, PT-FI and
FM O&G LLC had entered into the $3.0 billion revolving credit
facility on May 31, 2013 (upon completion of the acquisition of
PXP). At December 31, 2014, there were no borrowings and
$45 million of letters of credit issued under the revolving credit
facility, resulting in availability of approximately $4.0 billion,
of which $1.5 billion could be used for additional letters of credit.
In February 2015, the revolving credit facility was amended
(refer to Note 18 for further discussion).
Interest on the revolving credit facility (effective February 11,
2015, LIBOR plus 1.75 percent or ABR plus 0.75 percent; previously
LIBOR plus 1.50 percent or ABR plus 0.50 percent) is determined
by reference to FCX’s credit ratings.
Lines of Credit. At December 31, 2014, FCX had $474 million
outstanding on its uncommitted and short-term lines of credit
with certain financial institutions. These unsecured lines of credit
allow FCX to borrow at a spread over LIBOR or the respective
financial institution’s cost of funds with terms and pricing that are
generally more favorable than FCX’s revolving credit facility. The
weighted-average effective interest rate on the lines of credit was
1.29 percent at December 31, 2014.
Subsidiary Credit Facility. In March 2014, Cerro Verde (FCX’s
mining subsidiary in Peru) entered into a five-year, $1.8 billion
senior unsecured credit facility that is nonrecourse to FCX and the
other shareholders of Cerro Verde. The credit facility allows for
term loan borrowings up to the full amount of the facility, less any
amounts issued and outstanding under a $500 million letter of
credit sublimit. Interest on amounts drawn under the term loan is
based on LIBOR plus a spread (currently 1.90 percent) based
on Cerro Verde’s total net debt to earnings before interest, taxes,
depreciation and amortization (EBITDA) ratio as defined in the
agreement. Amounts may be drawn or letters of credit may be
issued over a two-year period to fund a portion of Cerro Verde’s
expansion project and for Cerro Verde’s general corporate
purposes. The credit facility amortizes in three installments in
amounts necessary for the aggregate borrowings and outstanding
letters of credit not to exceed 85 percent of the $1.8 billion
commitment on September 30, 2017, 70 percent on March 31,
2018, and 35 percent on September 30, 2018, with the remaining
balance due on the maturity date of March 10, 2019. At December 31,
2014, $425 million was outstanding and no letters of credit
were issued under Cerro Verde’s credit facility. The effective
interest rate on Cerro Verde’s credit facility was 2.07 percent at
December 31, 2014.
Senior Notes issued by FCX. In November 2014, FCX sold
$750 million of 2.30% Senior Notes due 2017, $600 million of
4.00% Senior Notes due 2021, $850 million of 4.55% Senior Notes
due 2024 and $800 million of 5.40% Senior Notes due 2034 for
total net proceeds of $2.97 billion. The 2.30% Senior Notes and
the 4.00% Senior Notes are redeemable in whole or in part, at the
option of FCX, at a make-whole redemption price. The 4.55%
Senior Notes are redeemable in whole or in part, at the option of
FCX, at a make-whole redemption price prior to August 14, 2024,
and thereafter at 100 percent of principal. The 5.40% Senior Notes
are redeemable in whole or in part, at the option of FCX, at a
make-whole redemption price prior to May 14, 2034, and
thereafter at 100 percent of principal. FCX used the net proceeds
from these senior notes to repay certain of its outstanding debt.
In March 2013, in connection with the financing of FCX’s
acquisitions of PXP and MMR, FCX issued $6.5 billion of
unsecured senior notes in four tranches. FCX sold $1.5 billion of
2.375% Senior Notes due March 2018, $1.0 billion of 3.100%
Senior Notes due March 2020, $2.0 billion of 3.875% Senior Notes
due March 2023 and $2.0 billion of 5.450% Senior Notes due
March 2043 for total net proceeds of $6.4 billion. The 2.375%
Senior Notes and the 3.100% Senior Notes are redeemable in
whole or in part, at the option of FCX, at a make-whole
redemption price. The 3.875% Senior Notes are redeemable in
whole or in part, at the option of FCX, at a make-whole
redemption price prior to December 15, 2022, and thereafter at
100 percent of principal. The 5.450% Senior Notes are redeemable
in whole or in part, at the option of FCX, at a make-whole
redemption price prior to September 15, 2042, and thereafter at
100 percent of principal.
In February 2012, FCX sold $500 million of 1.40% Senior Notes
due 2015, $500 million of 2.15% Senior Notes due 2017 and
$2.0 billion of 3.55% Senior Notes due 2022 for total net proceeds
of $2.97 billion. In December 2014, FCX redeemed all of its
outstanding $500 million of 1.40% Senior Notes due 2015. The
2.15% Senior Notes are redeemable in whole or in part, at the
option of FCX, at a make-whole redemption price prior to the
redemption date. The 3.55% Senior Notes are redeemable in
whole or in part, at the option of FCX, at a make-whole
redemption price prior to December 1, 2021, and thereafter at
100 percent of principal.
These senior notes rank equally with FCX’s other existing and
future unsecured and unsubordinated indebtedness.
Senior Notes issued by FM O&G. In May 2013, in connection with
the acquisition of PXP, FCX assumed unsecured senior notes with
a stated value of $6.4 billion, which was increased by $716 million
to reflect the acquisition-date fair market value of these senior
notes. The fair value adjustments are being amortized over the