Note 2. Long-Term Debt

The company's borrowings consisted of the following at December 31 (in thousands):

	2012		2011

Term loan	$	261,250	$	—
7³/8% senior notes due 2012		—		700,000
5.125% convertible senior notes due 2014		287,496		287,500
6³/4% senior notes due 2015		500,000		500,000
7³/4% senior notes due 2016		—		500,000
6¹/8% senior notes due 2019		400,000		—
7⁵/8% senior notes due 2020		350,000		350,000
6³/8% senior notes due 2022		350,000		—
Other secured obligations		53,491		42,600

Total debt		2,202,237		2,380,100
Less current maturities		29,631		444,078

Long-term debt	$	2,172,606	$	1,936,022

Refinancing Activity

On January 11, 2012, the company expanded its senior secured credit facility by adding a $275.0 million term loan that matures on September 30, 2016 (Term Loan). The company used the net proceeds of the Term Loan, together with available cash, to fund the January 2012 purchase (pursuant to a tender offer) of $279.7 million (plus accrued interest) of the company's 7³/8% Senior Notes due 2012. On August 16, 2012, the company issued $400.0 million of 6¹/8% Senior Notes due 2019 (2019 Senior Notes) and $350.0 million of 6³/8% Senior Notes due 2022 (2022 Senior Notes). A portion of the net proceeds from the issuance of the 2019 and 2022 Senior Notes were used to fund the August 16, 2012 purchase of another $62.2 million (plus accrued interest) of the company's 7³/8% Senior Notes due 2012 (pursuant to a tender offer). A further portion of these proceeds were used to fund the August 16, 2012 purchase (pursuant to a tender offer) of $410.5 million (plus accrued interest) of the company's 7³/4% Senior Notes due 2016, and the August 31, 2012 redemption of the then remaining $89.5 million (plus accrued interest) outstanding 7³/4% Senior Notes due 2016. The remaining proceeds from the issuance of the 2019 and 2022 Senior Notes along with available cash were used for the September 28, 2012 extinguishment of the then remaining $358.1 million (plus accrued interest through the November 1, 2012 maturity date) outstanding 7³/8% Senior Notes due 2012.

At the conclusion of this refinancing activity, all $700.0 million of the 7³/8% Senior Notes due 2012 were paid off, as was all $500.0 million of the 7³/4% Senior Notes due 2016; and new debt was issued in the form of the $275.0 million term loan due 2016, the $400.0 million 6¹/8% Senior Notes due 2019, and the $350.0 million 6³/8% Senior Notes due 2022. As a result of the refinancing activity, overall outstanding long-term debt was reduced by $175.0 million, the company's long-term debt maturity profile was extended, and the overall cost of debt was reduced.

The refinancing activity during 2012 resulted in the company recording expenses of $40.3 million related to tender and call premiums, write off of unamortized debt issuance costs, loss on early extinguishment of debt, and tender expenses, which are reflected in other expenses in the consolidated statement of income for the year ended December 31, 2012.

Senior Secured Credit Facility, due 2016

The company's senior secured credit facility (Facility), which provides a $1.1 billion revolver (Revolver), matures in September 2016. Subject to certain conditions, the company has the opportunity to increase the Revolver size by an additional $125.0 million. The Facility is guaranteed by certain of the company's subsidiaries; and is secured by substantially all of the company's and its wholly-owned subsidiaries' receivables and inventories, and by pledges of all shares of the company's wholly-owned subsidiaries' capital stock. The Revolver is available to fund working capital, capital expenditures, and other general corporate purposes. On January 11, 2012, the company expanded the Facility by adding a $275.0 million term loan that matures on September 30, 2016 (Term Loan). Quarterly principal payments under the Term Loan are required to be made in amounts ranging from 1.25% to 3.75% of the original principal amount, with the unpaid principal balance of approximately $158 million due on the maturity date. Interest on the Term Loan is based on the Facility's pricing grid (2.1% at December 31, 2012), and is payable quarterly.

The Facility pricing grid is adjusted quarterly and is based on the company's leverage of total debt to last-twelve-month's (LTM) adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, and certain other non-cash transactions, as defined in the credit agreement). The minimum pricing is LIBOR plus 1.00% or Prime, and the maximum pricing is LIBOR plus 2.00% or Prime plus 1.00%. In addition, the company is subject to an unused commitment fee of between 0.25% and 0.45% (based on leverage of total debt to LTM adjusted EBITDA) which is applied to the unused portion of the $1.1 billion revolver each quarter.

The Facility contains financial covenants and other covenants that limit or restrict our ability to make capital expenditures; incur indebtedness; permit liens on property; enter into transactions with affiliates; make restricted payments or investments; enter into mergers, acquisitions or consolidations; conduct asset sales; pay dividends or distributions and enter into other specified transactions and activities. Our ability to borrow funds within the terms of the Revolver is dependent upon our continued compliance with the financial and other covenants. The Facility also contains a borrowing base requirement regarding the maximum availability of the Revolver. The company's Revolver must be the lesser of:

I.

$1.1 billion less other applicable commitments, such as letters of credit and other secured debt, as defined within the credit agreement, or;

II.

The sum of 85% of the company's eligible accounts receivable and 65% of the company's eligible inventories, less other applicable commitments, such as letters of credit and other secured debt, as defined within the credit agreement.

At December 31, 2012, the company had $1.1 billion of availability on the Revolver, $14.0 million of outstanding letters of credit and other obligations which reduce availability, and there were no borrowings outstanding.

The financial covenants under the company's Facility state that it must maintain an interest coverage ratio of not less than 2.50:1.00. The company's interest coverage ratio is calculated by dividing its LTM consolidated adjusted EBITDA by its LTM gross interest expense less amortization of financing fees. In addition, a net debt (as defined in the Facility) to consolidated LTM adjusted EBITDA ratio (leverage ratio) of not more than 5.00:1.00 must be maintained. If the net debt to EBITDA ratio exceeds 3.50:1:00 at any time, the company's ability to make restricted payments as defined in the credit agreement (which includes cash dividends to stockholders and share purchases, among other things), is limited. At December 31, 2012, the company's interest coverage ratio and net debt leverage ratio were 4.05:1.00 and 2.93:1.00, respectively. The company was therefore in compliance with these covenants at December 31, 2012, and anticipates remaining in compliance during the next twelve months.

5.125% Convertible Senior Notes, due 2014

The $287.5 million of 5.125% convertible senior notes mature in June 2014. The Convertible Senior notes are non-cancelable prior to June 2014 and bear interest at 5.125% payable semi-annually in arrears on June 15 and December 15 of each year. Note holders can convert the notes into the company's common stock at a current conversion rate of 57.845 per $1,000 principal amount of notes (16,630,206 shares). The conversion rate is fixed, except for standard anti-dilution provisions related to such events as the issuance of common stock as a dividend or distribution, the effect of a share split or share combination, issuance to all or substantially all holders of our common stock certain rights or warrants to subscribe for or purchase shares of our common stock, pay cash dividends or distributions to all or substantially all holders of our common stock other than regular quarterly cash dividends exceeding an established threshold amount per share ($0.075), or if we make a payment in respect of a tender offer or exchange offer for our common stock. In addition, on or after June 20, 2012, if the last reported sales price of the company's common stock for 20 or more trading days in a period of 30 consecutive trading days ending on the trading day prior to the date the company provides the notice of redemption to holders exceeds 130% of the applicable conversion price ($17.29 per share at December 31, 2012) in effect on each such trading day, the company may redeem for cash all or part of the notes at a price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest. The 5.125% convertible senior notes are equal in right of payment with all existing and future senior unsecured indebtedness and senior in right of payment to all subordinated indebtedness.

6³/4% Senior Notes due 2015

The $500.0 million of 6³/4% senior notes mature in 2015 (2015 Senior Notes), and pay interest semiannually on April 1 and October 1 of each year. The 2015 Senior Notes contain provisions that allow the company to redeem the notes any time on or after April 1, 2012 at a redemption price of 101.688%, and on or after April 1, 2013 at 100.000%. The 2015 Senior Notes are in equal right of payment with all existing and future senior unsecured indebtedness and senior in right of payment to all subordinated indebtedness.

6¹/8% Senior Notes due 2019

On August 16, 2012, the company issued $400.0 million of 6¹/8% Senior Notes due 2019 (2019 Senior Notes). Interest on the 2019 Senior Notes is due semiannually on February 15 and August 15 of each year with the first payment due on February 15, 2013. Before August 15, 2015, the company may redeem up to 35% of each of the 2019 Senior Notes at a redemption price of 106.125% of their principal amount, using the proceeds from the sales of the company's common stock. The 2019 Senior Notes contain provisions that allow the company to redeem the notes any time on or after August 15, 2016 at a redemption price of 103.063%, on or after August 15, 2017 at a redemption price of 101.531%, and on or after August 15, 2018 at 100.000%. At any time prior to August 15, 2016, the company may redeem some or all of the 2019 Senior Notes by paying a "make-whole" premium. The 2019 Senior Notes are in equal right of payment with all existing and future senior unsecured indebtedness and senior in right of payment to all subordinated indebtedness.

7⁵/8% Senior Notes due 2020

In March 2010, the company issued $350.0 million of 7⁵/8% senior notes due 2020 (2020 Senior Notes). The net proceeds from the 2020 Senior Notes were used to repay the then outstanding amounts under the company's senior secured revolving credit facility and for general corporate purposes. The 2020 Senior Notes mature in 2020, and pay interest semi-annually on March 15 and September 15 of each year. Prior to March 15, 2013, the company may redeem up to 35% of the principal amount of the 2020 Senior Notes with the net cash proceeds of one or more sales of its common stock at a redemption price of 107.625%. In addition, the company may redeem the 2020 Senior Notes at any time after March 15, 2015 at a redemption price of 103.813%, on or after March 15, 2016 at a redemption price of 102.542%, on or after March 15, 2017 at a redemption price of 101.271%, and on or after March 15, 2018 at a redemption price of 100.000%. The 2020 Senior Notes are equal in right of payment with all existing and future senior unsecured indebtedness and senior in right of payment to all subordinated indebtedness.

6³/8% Senior Notes due 2022

On August 16, 2012, the company issued $350.0 million of 6³/8% Senior Notes due 2022 (2022 Senior Notes). Interest on the 2022 Senior Notes is due semiannually on February 15 and August 15 of each year with the first payment due on February 15, 2013. Before August 15, 2015, the company may redeem up to 35% of the 2022 Senior Notes at a redemption price of 106.375% of their principal amount, using the proceeds from the sales of the company's common stock. The 2022 Senior Notes contain provisions that allow the company to redeem the notes any time on or after August 15, 2017 at a redemption price of 103.188%, on or after August 15, 2018 at a redemption price of 102.125%, on or after August 15, 2019 at a redemption price of 101.063%, and on or after August 15, 2020 at 100.000%. At any time prior to August 15, 2017, the company may redeem some or all of the 2022 Senior Notes by paying a "make-whole" premium. The 2022 Senior Notes are in equal right of payment with all existing and future senior unsecured indebtedness and senior in right of payment to all subordinated indebtedness.

Other Secured Obligations

Mesabi Nugget Loan Participation. Pursuant to the construction and financing of the Mesabi Nugget iron-nugget project, the company entered into financing arrangements with Mesabi Nugget. The amended agreements provided Mesabi Nugget with an $85.0 million revolving credit facility and $240.0 million in a term facility. Under these agreements, the company is the lender (with first lien security rights on substantially all of Mesabi Nugget's assets) and Mesabi Nugget is the borrower. Under one of the term agreements the company sold and assigned to Kobe a participation interest, for which Kobe provided $25.0 million in 2009 and an additional $10 million in 2010. Effective December 31, 2010, the company converted $130.0 million (81% of the total conversion amount) of term notes into equity of Mesabi Nugget, and Kobe converted $30.5 million (19% of the total conversion amount) of its $35.0 million loan participation into equity of Mesabi Nugget. The remaining portion of the outstanding loan balances between the company and Mesabi Nugget are eliminated through consolidation. The remaining $4.5 million (less current portion of $901,000) of Kobe loan participation is included in the company's consolidated other long term debt at December 31, 2012. The weighted average interest rate on this debt at December 31, 2012 was 3.0%.

Minnesota Economic Development State Loans. During 2009 and 2010, Mesabi Nugget received $26.5 million from various Minnesota state agencies for the construction and ultimate operation of the company's Mesabi Nugget project. Monthly principal and interest payments began in August 2012. The 3.5% interest rate at December 31, 2012 is expected to remain through February 2017, and then change to 5.0% through maturity in 2027. Amounts due under these loans were $28.8 million and $26.5 million at December 31, 2012 and 2011, respectively.

Other. The company has an electricity transmission facility loan which bears interest at 8.1%, with monthly principal and interest payments required through maturity in 2022. The company has an unused $4.0 million stand-by letter of credit in conjunction with this loan. The outstanding principal balance was $6.4 million and $6.9 million as of December 31, 2012 and 2011, respectively. In 2012, one of the company's controlled subsidiaries entered into a secured credit agreement which provided $10.0 million in variable rate (3.375% at December 31, 2012) term borrowings through April 2013, and a revolving variable rate credit facility of up to $24.0 million (increasing to $34.0 million after April 2013), subject to a borrowing base determined from eligible accounts receivable and inventory. Interest is payable monthly.

Outstanding Debt Maturities

Maturities of outstanding debt as of December 31, 2012; are as follows (in thousands):


2013	$	29,631
2014		318,115
2015		544,470
2016		182,559
2017		3,037
Thereafter		1,124,425

	$	2,202,237

The company capitalizes interest on all qualifying construction-in-progress assets. For the years ended December 31, 2012, 2011 and 2010, total interest costs incurred were $160.0 million, $178.7 million, and $177.2 million, respectively, of which $1.4 million, $1.7 million and $7.0 million, respectively, were capitalized. Cash paid for interest was $154.1 million, $171.8 million, and $162.4 million for the years ended December 31, 2012, 2011, and 2010, respectively.