| Debt | M. Debt Long-Term Debt.
December 31,
2020
2019
6.75% Notes, due 2024
$
750
$
750
7.00% Notes, due 2026
500
500
5.500% Notes, due 2027
750
—
6.125% Notes, due 2028
500
500
Other
6
84
Unamortized discounts and deferred financing costs
(41
)
(34
)
Total
2,465
1,800
Less: amount due within one year
2
1
Long-term debt, less amount due within one year
$
2,463
$
1,799
The principal amount of long-term debt maturing in each of the next five years is $2 in 2021, $1 in each of 2022 and 2023, $751 in 2024, and $1 in 2025. In 2019, Other includes $77 classified as Long-term debt due to an option to extend. In 2020, the instrument was reclassified to Short-term borrowings due to the expected maturity in 2021 and was included in Other current liabilities on the accompanying Consolidated Balance Sheet. 144A Debt . In July 2020, Alcoa Nederland Holding B.V. (ANHBV), a wholly-owned subsidiary of Alcoa Corporation, completed a Rule 144A (U.S. Securities Act of 1933, as amended) debt issuance for $750 aggregate principal amount of 5.500% Senior Notes due 2027 (the “2027 Notes”). The net proceeds of this issuance were approximately $736 reflecting a discount to the initial purchasers of the 2027 Notes as well as issuance costs. The net proceeds were used for general corporate purposes, including adding cash to its balance sheet. The discount to the initial purchasers, as well as costs to complete the financing, was deferred and is being amortized to interest expense over the term of the 2027 Notes. Interest on the 2027 Notes is paid semi-annually in June and December, which commenced on December 15, 2020. The indenture contains customary affirmative and negative covenants that are similar to those included in the indenture for the 2028 Notes described below, such as limitations on liens, limitations on sale and leaseback transactions, and a prohibition on a reduction in the ownership of AWAC entities below an agreed level. ANHBV has the option to redeem the 2027 Notes on at least 15 days, but not more than 60 days, prior notice to the holders of the 2027 Notes under multiple scenarios, including, in whole or in part, at any time or from time to time after June 15, 2023, at a redemption price specified in the indenture (up to 102.750% of the principal amount plus any accrued and unpaid interest in each case). Also, the 2027 Notes are subject to repurchase upon the occurrence of a change in control repurchase event (as defined in the indenture) at a repurchase price in cash equal to 101% of the aggregate principal amount of the 2027 Notes repurchased, plus any accrued and unpaid interest on the 2027 Notes repurchased. In May 2018, ANHBV, completed a Rule 144A (U.S. Securities Act of 1933, as amended) debt offering for $500 aggregate principal amount of 6.125% Senior Notes due 2028 (the “2028 Notes”). ANHBV received $492 in net proceeds from the debt offering reflecting a discount to the initial purchasers of the 2028 Notes. The net proceeds, along with available cash on hand, were used to make discretionary contributions to certain U.S. defined benefit pension plans (see Note O). The discount to the initial purchasers, as well as costs to complete the financing, was deferred and is being amortized to interest expense over the term of the 2028 Notes. Interest on the 2028 Notes is paid semi-annually in November and May, which commenced November 15, 2018. ANHBV has the option to redeem the 2028 Notes on at least 30 days, but not more than 60 days, prior notice to the holders of the 2028 Notes under multiple scenarios, including, in whole or in part, at any time or from time to time after May 2023 at a redemption price specified in the indenture (up to 103.063% of the principal amount plus any accrued and unpaid interest in each case). Also, the 2028 Notes are subject to repurchase upon the occurrence of a change in control repurchase event (as defined in the indenture) at a repurchase price in cash equal to 101% of the aggregate principal amount of the 2028 Notes repurchased, plus any accrued and unpaid interest on the 2028 Notes repurchased. The 2028 Notes indenture includes several customary affirmative covenants. Additionally, the 2028 Notes indenture contains several negative covenants, that, subject to certain exceptions, include limitations on liens, limitations on sale and leaseback transactions, and a prohibition on a reduction in the ownership of AWAC entities below an agreed level. The negative covenants in the 2028 Notes indenture are less extensive than those in the 2024 Notes and 2026 Notes (see below) indenture and the Revolving Credit Facility (see below). For example, the 2028 Notes indenture does not include a limitation on restricted payments, such as repurchases of common stock and shareholder dividends. In September 2016, ANHBV completed a Rule 144A (U.S. Securities Act of 1933, as amended) debt offering for $750 aggregate principal amount of 6.75% Senior Notes due 2024 (the “2024 Notes”) and $500 aggregate principal amount of 7.00% Senior Notes due 2026 (the “2026 Notes” and, collectively with the 2024 Notes, the “Notes”). ANHBV received $1,228 in net proceeds from the debt offering reflecting a discount to the initial purchasers of the Notes. The net proceeds were used to make a payment to ParentCo to fund the transfer of certain assets from ParentCo to Alcoa Corporation in connection with the Separation Transaction, and the remaining net proceeds were used for general corporate purposes. The discount to the initial purchasers, as well as costs to complete the financing, was deferred and is being amortized to interest expense over the respective terms of the Notes. Interest on the Notes is paid semi-annually in March and September, which commenced March 31, 2017. ANHBV has the option to redeem the Notes on at least 30 days, but not more than 60 days, prior notice to the holders of the Notes under multiple scenarios, including, in whole or in part, at any time or from time to time after September 2019, in the case of the 2024 Notes, or after September 2021, in the case of the 2026 Notes, at a redemption price specified in the indenture (up to 103.375% of the principal amount for the 2024 Notes and up to 103.500% of the principal amount of the 2026 Notes, plus any accrued and unpaid interest in each case). Also, the Notes are subject to repurchase upon the occurrence of a change in control repurchase event (as defined in the indenture) at a repurchase price in cash equal to 101% of the aggregate principal amount of the Notes repurchased, plus any accrued and unpaid interest on the Notes repurchased. The Notes indenture contains various restrictive covenants similar to those described below for the Revolving Credit Facility, including a limitation on restricted payments, with, among other exceptions, capacity to pay annual ordinary dividends. Under the indenture, Alcoa Corporation may declare and make annual ordinary dividends in an aggregate amount not to exceed $38 in each of the November 1, 2016 through December 31, 2017 time period and annual 2018 (no such dividends were made), $50 in each of annual 2019 and 2020 (no such dividends were made in 2019 or 2020), and $75 in the January 1, 2021 through September 30, 2026 (maturity date of the 2026 Notes) time period, except that 50% of any unused amount of the base amount in any of the specified time periods may be used in the next succeeding period following the use of the base amount in said time period. Additionally, the restricted payments negative covenant includes a general exception to allow for potential future transactions incremental to those specifically provided for in the Notes indenture. This general exception provides for an aggregate amount of restricted payments not to exceed the greater of $ 250 and 1.5 % of Alcoa Corporation’s consolidated total assets. Accordingly, Alcoa Corporation may make annual ordinary dividends in any fiscal year by an aggregate amount of up to $250, assuming no other restricted payments have reduced, in part or whole, the available limit. The limits of the restricted payments negative covenant under the Revolving Credit Facility would govern the amount of ordinary dividend payments Alcoa Corporation could make in a given timeframe if the allowed amount is less than the limits of the restricted payments negative covenant under the Notes indenture. The Notes, the 2027 Notes, and the 2028 Notes are senior unsecured obligations of ANHBV and do not entitle the holders to any registration rights pursuant to a registration rights agreement. ANHBV does not intend to file a registration statement with respect to resales of or an exchange offer for the Notes, 2027 Notes, or 2028 Notes. The Notes, 2027 Notes, and 2028 Notes are guaranteed on a senior unsecured basis by Alcoa Corporation and its subsidiaries that are guarantors under the Revolving Credit Facility (the “subsidiary guarantors” and, together with Alcoa Corporation, the “guarantors”). Each of the subsidiary guarantors will be released from their guarantees upon the occurrence of certain events, including the release of such guarantor from its obligations as a guarantor under the Revolving Credit Facility. The Notes, the 2027 Notes, and the 2028 Notes rank equally in right of payment with each other and with all of ANHBV’S existing and future senior unsecured indebtedness; rank senior in right of payment to any future subordinated obligations of ANHBV; and are effectively subordinated to ANHBV’s existing and future secured indebtedness, including under the Revolving Credit Facility, to the extent of the value of property and assets securing such indebtedness. The guarantees of the Notes, the 2027 Notes, and the 2028 Notes rank equally in right of payment with each other and with all the guarantors’ existing and future senior unsecured indebtedness; rank senior in right of payment to any future subordinated obligations of the guarantors; and are effectively subordinated to the guarantors’ existing and future secured indebtedness, including under the Revolving Credit Facility, to the extent of the value of property and assets securing such indebtedness. Credit Facilities. Alcoa Norway ANS On October 2, 2019, Alcoa Norway ANS, a wholly-owned subsidiary of Alcoa Corporation, entered into a one-year, multicurrency revolving credit facility agreement for NOK 1.3 billion (approximately $152) which is fully and unconditionally guaranteed on an unsecured basis by Alcoa Corporation. Alcoa Norway ANS pays a quarterly commitment fee of 0.465% on the unused portion of the revolving credit facility. The interest rate on outstanding NOK loan balances is 1.55% per annum plus the Norwegian Interbank Offered Rate (NIBOR); the interest rate on outstanding US dollar loans is 1.65% per annum plus LIBOR. On April 8, 2020, Alcoa Norway ANS drew $100 against this facility, and may do so from time to time in the future, in the ordinary course of business. Repayment of the drawn amount, including interest accrued at 2.93%, occurred upon maturity on June 29, 2020. During 2019, no amounts were drawn related to this credit facility. On July 3, 2020, Alcoa Norway ANS amended the multicurrency revolving credit facility agreement to align the terms of the agreement with Amendment No. 2 and Amendment No. 3 of the Revolving Credit Facility discussed below. On September 30, 2020, Alcoa Norway ANS entered into an Amendment and Restatement Agreement (the A&R Agreement) to the multicurrency revolving credit facility agreement that extended the maturity one year from the original maturity date to October 2, 2021, unless further extended or terminated early in accordance with the provisions of the A&R Agreement. The A&R Agreement also amended certain financial ratio covenants, specifying calculations based upon the results of Alcoa Norway ANS rather than the calculations outlined in the Revolving Credit Facility. Additionally, the quarterly commitment fee on the unused portion of the multicurrency revolving credit facility was modified from 0.465% to 0.62%. At December 31, 2020 and 2019, Alcoa Norway ANS was in compliance with all such covenants. At December 31, 2020 and 2019, there were no amounts outstanding related to this credit facility. Revolving Credit Facility On November 21, 2018, Alcoa Corporation and ANHBV entered into a Second Amendment and Restatement Agreement to the Revolving Credit Agreement dated September 16, 2016 and the Amendment and Restatement Agreement dated November 14, 2017, in each case, with a syndicate of lenders and issuers named therein, to revise certain terms and provisions of the original agreement (the Amendment and Restatement Agreement as revised by the Second Amendment and Restatement Agreement, hereafter referred to as the “Revolving Credit Facility” or “the Facility”). On April 21, 2020, the Company and ANHBV entered into an amendment (Amendment No. 2) to the Revolving Credit Facility that temporarily adjusts the leverage ratio requirement to 3.00 to 1.00 from 2.5 to 1.00 for the subsequent four consecutive fiscal quarters, beginning in the second quarter of 2020 (the Amendment Period). The leverage ratio requirement will return to 2.50 to 1.00 starting in the second quarter of 2021. During the Amendment Period, the Company, ANHBV, and any restricted subsidiaries will be restricted from making certain restricted payments or incurring incremental secured loans under the Revolving Credit Facility . On June 24, 2020, the Company and ANHBV entered into an additional amendment (Amendment No. 3) to the Revolving Credit Facility that (i) permanently adjusts the calculation of Consolidated EBITDA (as defined in the Revolving Credit Facility) by allowing the add back of certain additional non-cash costs, and (ii) temporarily adjusted, for the remaining fiscal quarters in 2020, the manner in which Consolidated Cash Interest Expense (as defined in the Revolving Credit Facility) and Total Indebtedness are calculated with respect to certain senior notes issuances during the fiscal year ended December 31, 2020, inclusive of the July 2020 issuance discussed above. ANHBV has the option to extend the periods under Amendment No. 3 to apply to either or both fiscal quarters ending March 31, 2021 and June 30, 2021. However, doing so would also reduce the borrowing availability under the Revolving Credit Facility during the respective fiscal quarters by one-third of the net proceeds of any note issuances during the fiscal year ended December 31, 2020. During the fourth quarter of 2020, ANHBV elected to extend the period under Amendment No. 3 through the quarter ending March 31, 2021, and if ANHBV elects to extend the period through June 30, 2021, the request for extension must be provided on or prior to April 1, 2021. Election by ANHBV to extend the temporary amendments results in the 2027 Notes reducing the aggregate amount of commitments under the Revolving Credit Facility by approximately $245 during the applicable fiscal quarters. The Revolving Credit Facility provides a $1,500 senior secured revolving credit facility to be used for working capital and/or other general corporate purposes of Alcoa Corporation and its subsidiaries. Subject to the terms and conditions of the Revolving Credit Facility, ANHBV may from time to time request the issuance of letters of credit up to $750 under the Facility, subject to a sublimit of $400 for any letters of credit issued for the account of Alcoa Corporation or any of its domestic subsidiaries. Additionally, ANHBV may from time to time request that each of the lenders provide one or more additional tranches of term loans and/or increase the aggregate amount of revolving commitments, together in an aggregate principal amount of up to $500. The Revolving Credit Facility is scheduled to mature on November 21, 2023, unless extended or earlier terminated in accordance with the provisions of the Facility. ANHBV may make extension requests during the term of the Facility, subject to the lender consent requirements specifically set forth in the Revolving Credit Facility. Under the provisions of the Revolving Credit Facility, ANHBV will pay a quarterly commitment fee ranging from 0.200% to 0.425% (based on Alcoa Corporation’s leverage ratio) on the unused portion. A maximum of $750 in outstanding borrowings under the Revolving Credit Facility may be denominated in euros. Loans will bear interest at a rate per annum equal to an applicable margin plus, at ANHBV’s option, either (a) an adjusted LIBOR rate or (b) a base rate determined by reference to the highest of (1) the U.S. prime rate as published in the Wall Street Journal, (2) the greater of the federal funds effective rate and the overnight bank funding rate, plus 0.5%, and (3) the one month adjusted LIBOR rate plus 1% per annum. The applicable margin for all loans will vary based on Alcoa Corporation’s leverage ratio and will range from 1.50% to 2.25% for LIBOR loans and 0.50% to 1.25% for base rate loans, subject in each case to a reduction of 25 basis points if Alcoa Corporation attains at least a Baa3 rating from either Moody’s Investor Service or BBB- rating from Standard and Poor’s Global Ratings. Outstanding borrowings may be prepaid without premium or penalty, subject to customary breakage costs. All obligations of Alcoa Corporation or a domestic entity under the Revolving Credit Facility are secured by, subject to certain exceptions (including a limitation of pledges of equity interests in certain foreign subsidiaries to 65%, and certain thresholds with respect to real property), a first priority lien on substantially all assets of Alcoa Corporation and the material domestic wholly-owned subsidiaries of Alcoa Corporation and certain equity interests of specified non-U.S. subsidiaries. All other obligations under the Revolving Credit Facility are secured by, subject to certain exceptions (including certain thresholds with respect to real property), a first priority security interest in substantially all assets of Alcoa Corporation, ANHBV, the material domestic wholly-owned subsidiaries of Alcoa Corporation, and the material foreign wholly-owned subsidiaries of Alcoa Corporation located in Australia, Brazil, Canada, Luxembourg, the Netherlands, Norway, and Switzerland, including equity interests of certain subsidiaries that directly hold equity interests in AWAC entities. However, no AWAC entity is a guarantor of any obligation under the Revolving Credit Facility and no asset of any AWAC entity, or equity interests in any AWAC entity, will be pledged to secure the obligations under the Revolving Credit Facility. As provided in the Revolving Credit Facility, each of the mentioned companies shall be released from all obligations under the first priority lien and/or first priority security interest upon (i) Alcoa Corporation attaining at least a Baa3 rating from either Moody’s Investor Service or BBB- rating from Standard and Poor’s Global Ratings, in each case with a stable outlook or better, (ii) ANHBV delivering the required written notice, and (iii) no default or event of default, as defined in the Revolving Credit Facility, has occurred or is continuing (the date on which such conditions are met, the “Collateral Release Date”). The Revolving Credit Facility includes a number of customary affirmative covenants. Additionally, the Revolving Credit Facility contains a number of negative covenants (applicable to Alcoa Corporation and certain subsidiaries described as restricted), that, subject to certain exceptions, include limitations on (among other things): liens; fundamental changes; sales of assets; indebtedness (see below); entering into restrictive agreements; restricted payments (see below), including repurchases of common stock and shareholder dividends (see below); investments (see below), loans, advances, guarantees, and acquisitions; transactions with affiliates; amendment of certain material documents; and a covenant prohibiting reductions in the ownership of AWAC entities, and certain other specified restricted subsidiaries of Alcoa Corporation, below an agreed level. The Revolving Credit Facility also includes financial covenants requiring the maintenance of a specified interest expense coverage ratio of not less than 5.00 to 1.00, and a leverage ratio for any period of four consecutive fiscal quarters that is not greater than 2.50 to 1.00 (2.00 to 1.00 beginning on and subsequent to the Collateral Release Date, may be increased to a level not higher than 2.25 to 1.00 under certain circumstances). In accordance with Amendment No. 2, the leverage ratio for the Amendment Period is 3.00 to 1.00. As of December 31, 2020 and 2019, maximum additional borrowing capacity to remain in compliance with these covenants was $1,322 and $1,200, respectively. As of December 31, 2020 and 2019, Alcoa Corporation was in compliance with all such covenants. The indebtedness, restricted payments, and investments negative covenants include general exceptions to allow for potential future transactions incremental to those specifically provided for in the Revolving Credit Facility. The indebtedness negative covenant provides for an incremental amount not to exceed the greater of $1,000 and 6.0% of Alcoa Corporation’s consolidated total assets. Additionally, the restricted payments negative covenant provides for an aggregate amount not to exceed $100 and the investments negative covenant provides for an aggregate amount not to exceed $400, both of which contain two conditions in which these limits may increase. First, in any fiscal year, the thresholds for the restricted payments and investments negative covenants increase by $250 and $200, respectively, if the consolidated net leverage ratio is not greater than 1.50 to 1.00 and 1.50 to 1.00, respectively, as of the end of the prior fiscal year. Secondly, in regards to both the $100 and $250 for restricted payments and the $200 for investments, 50% of any unused amount of these base amounts in any fiscal year may be used in the next succeeding fiscal year. The following describes the specific restricted payment negative covenant for share repurchases and the application of the restricted payments general exception (described above) to both share repurchases and ordinary dividend payments, all subject to the restrictions applicable during the Amendment Period. Alcoa Corporation may repurchase shares of its common stock pursuant to stock option exercises and benefit plans in an aggregate amount not to exceed $25 during any fiscal year, except that 50% of any unused amount of the base amount in any fiscal year may be used in the next succeeding fiscal year following the use of the base amount in said fiscal year. Additionally, as described above, the Revolving Credit Facility provides general exceptions to the restricted payments negative covenant that would allow Alcoa Corporation to execute share repurchases for any purpose in any fiscal year by an aggregate amount of up to $100 (see above for conditions that provide for this limit to increase), assuming no other restricted payments have reduced, in part or whole, the available limit. Also, any ordinary dividend payments made by Alcoa Corporation are only subject to the general exception for restricted payments described above. Accordingly, Alcoa Corporation may make annual ordinary dividends in any fiscal year by an aggregate amount of up to $100 (see above for conditions that provide for this limit to increase), assuming no other restricted payments have reduced, in part or whole, the available limit. The limits of the restricted payments negative covenant under the Notes indenture (see 144A Debt above) would govern the amount of ordinary dividend payments Alcoa Corporation could make in a given timeframe if the allowed amount is less than the limits of the restricted payments negative covenant under the Revolving Credit Facility. The Revolving Credit Facility contains customary events of default, including with respect to a failure to make payments under the Revolving Credit Facility, cross-default and cross-judgment default, and certain bankruptcy and insolvency events. There were no borrowings outstanding at December 31, 2020 and 2019, and no amounts were borrowed during 2020 and 2019 under the Revolving Credit Facility. |
