Long-Term Debt

12 Months Ended

Dec. 31, 2019

Long-Term Debt

Long-Term Debt

Note 3. Long-Term Debt

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

	2019		2018
5 1/4% senior notes due 2023	$	400,000	$	400,000
2.800% senior notes due 2024		400,000		-
5.500% senior notes due 2024		500,000		500,000
4.125% senior notes due 2025		350,000		350,000
5.000% senior notes due 2026		400,000		400,000
3.450% senior notes due 2030		600,000		-
5.125% senior notes due 2021		-		700,000
Other obligations		114,472		51,393
Total debt		2,764,472		2,401,393
Less debt issuance costs		30,128		24,670
Total amounts outstanding		2,734,344		2,376,723
Less current maturities		89,356		24,234
Long-term debt	$	2,644,988	$	2,352,489

Financing Activity

In December 2019, the company issued $400.0 million of 2.800% senior notes due 2024 and $600.0 million of 3.450% senior notes due 2030, the proceeds of which were used to fund the December 2019 call and repayment at a redemption price of 100.000% of the $700.0 million outstanding principal amount of the company’s 5.125% senior notes due 2021, plus accrued and unpaid interest to, but not including, the date of repayment and general corporate purposes. The company recorded expenses related to write off of unamortized debt issuance costs and other expenses of $3.7 million, which are reflected in other expenses in the consolidated statements of income for the year ended December 31, 2019.

In September 2017, the company issued $350.0 million of 4.125% senior notes due 2025 (the "2025 Notes"), the proceeds of which, along with available cash, were used to fund the September 2017 tender offer to purchase at a redemption price of 103.563% a total of $182.9 million principal amount, plus accrued and unpaid interest to, but not including, the date of repurchase, of the company’s 6.375% senior notes due 2022 (the "2022 Notes"), and the October 2017 call and repayment at a redemption price of 103.188% of the $167.1 million remaining outstanding principal amount of the 2022 Notes, plus accrued and unpaid interest to, but not including, the date of repayment. The company recorded expenses related to tender and call premiums, write off of unamortized debt issuance costs, and other expenses of $14.6 million, which are reflected in other expenses in the consolidated statements of income for the year ended December 31, 2017.

Senior Credit Facility, due 2024

In December 2019, the company entered into a new unsecured credit agreement which has a senior unsecured revolving credit facility (Facility) which provides a $1.2 billion unsecured Revolver, which matures December 3, 2024. The new Credit Agreement replaces the secured June 2018 Third Amended and Restated Credit Agreement. Subject to certain conditions, the company has the ability to increase the facility size by $500.0 million. The Facility is available to fund working capital, capital expenditures, and other general corporate purposes. The Facility contains financial covenants and other covenants pertaining to the company’s ability to incur indebtedness, and permit liens on property. The company’s ability to borrow funds within the terms of the Facility is dependent upon its continued compliance with the financial and other covenants. At December 31, 2019, the company had $1.2 billion of availability on the Revolver, $42.0 million of outstanding letters of credit and other obligations which reduce availability, and there were no borrowings outstanding.

The Facility pricing grid is adjusted quarterly and is based on either the company’s leverage of net debt (as defined in the Facility) to last-twelve-months (LTM) consolidated adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, and certain other non-cash items as allowed in the Facility), or our credit ratings. The minimum pricing is LIBOR plus 1.125% or Prime plus 0.125%, and the maximum pricing is LIBOR plus 1.75% or Prime plus 0.75%. In addition, the company is subject to an unused commitment fee of between 0.15% and 0.275% (based on either our leverage of net debt to LTM consolidated adjusted EBITDA, or our credit ratings) which is applied to the unused portion of the Revolver.

Note 3. Long-Term Debt (Continued)

The financial covenants under the Facility state that the company 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 last-twelve-months (LTM) consolidated adjusted EBITDA by its LTM gross interest expense, less amortization of financing fees. In addition, a debt to capitalization ratio of not more than 0.60:1.00 must be maintained. At December 31, 2019, the company’s interest coverage ratio and debt to capitalization ratio were 10.72:1.00 and 0.40:1.00, respectively. The company was, therefore, in compliance with these covenants at December 31, 2019, and anticipates remaining in compliance during the next twelve months.

Senior Unsecured Notes

The company has six different tranches of senior unsecured notes (Notes) outstanding. These Notes are in equal right of payment with all existing and future senior unsecured indebtedness and are senior in right of payment to all subordinated indebtedness. These Notes contain provisions that allow the company to redeem the Notes on or after the dates and at redemption prices (expressed as a percentage of principal amount) listed below.

Our $400.0 million of 5 ¼% senior notes due 2023 mature on April 15, 2023 with interest payable semi-annually. Early redemption is permitted as follows: as of December 31, 2019 at 101.750%; as of April 15, 2020 at 100.875%; and as of April 15, 2021 at 100.000%.

Our $400.0 million of 2.800% senior notes due 2024 mature on December 15, 2024 with interest payable semi-annually. Early redemption is permitted as follows: any time prior to November 15, 2024 at a make-whole price of the remaining payments to be made discounted at the applicable U.S. Treasury rate plus 0.20%; and as of November 15, 2024 at 100.000%.

Our $500.0 million of 5.500% senior notes due 2024 mature on October 1, 2024 with interest payable semi-annually. Early redemption is permitted as follows: as of December 31, 2019 at 102.750%; as of October 1, 2020 at 101.833%; as of October 1, 2021 at 100.917%; and as of October 1, 2022 at 100.000%.

Our $350.0 million of 4.125% senior notes due 2025 mature on September 15, 2025 with interest payable semi-annually. Early redemption is permitted as follows: any time prior to September 15, 2020, up to 35% of principal amount at a redemption price of 104.125% using the proceeds from the sales of the company’s common stock, or at a make-whole price of the remaining payments to be made discounted at the applicable U.S. Treasury rate plus 0.50%; as of September 15, 2020 at 102.063%; as of September 15, 2021 at 101.031%; and as of September 15, 2022 at 100.000%.

Our $400.0 million of 5.000% senior notes due 2026 mature on December 15, 2026 with interest payable semi-annually. Early redemption is permitted as follows: any time prior to December 15, 2021, up to 35% of principal amount at a redemption price of 105.000% using the proceeds from the sales of the company’s common stock, or at a make-whole price of the remaining payments to be made discounted at the applicable U.S. Treasury rate plus 0.50%; as of December 15, 2021 at 102.500%; as of December 15, 2022 at 101.667%; as of December 15, 2023 at 100.833%; and as of December 15, 2024 at 100.000%.

Our $600.0 million of 3.450% senior notes due 2030 mature on April 15, 2030 with interest payable semi-annually. Early redemption is permitted as follows: any time prior to January 15, 2030 at a make-whole price of the remaining payments to be made discounted at the applicable U.S. Treasury rate plus 0.25%; and as of January 15, 2030 at 100.000%.

Other Obligations

Secured Loans. Two of the company’s controlled subsidiaries have entered into financing agreements for certain equipment which bear interest at an average rate of 5.4%, with monthly principal and interest payments required through 2028. The outstanding principal balance of these agreements was $10.7 million and $8.3 million at December 31, 2019, and 2018, respectively.

One of the company’s controlled subsidiaries has a secured credit agreement which provides a revolving variable rate credit facility of up to $70.0 million, subject to a borrowing base determined from eligible accounts receivable and inventory, and is further secured with letter of credit support from Steel Dynamics, Inc., which matures in August 2024. Interest, which was 3.19% at December 31, 2019, is payable monthly. Amounts due under the credit facility were $64.6 million and $19.6 million at December 31, 2019, and 2018, respectively.

Note 3. Long-Term Debt (Continued)

The company’s controlled subsidiary acquired in 2019 has a secured credit agreement which provides a revolving variable rate credit facility of up to $50.0 million, subject to a borrowing base determined from eligible accounts receivable and eligible inventory, which matures in March 2021. Interest, which was 2.69% at December 31, 2019, is payable monthly. Amount due under this credit facility was $19.0 million at December 31, 2019.

Mesabi Nugget has loans from various Minnesota state agencies related to the construction and ultimate operation of Mesabi Nugget. These loans require monthly principal and interest payments at a 5.0% interest rate through maturity in 2027. Amounts due under these loans were $17.1 million and $18.9 million at December 31, 2019, and 2018, respectively.

Unsecured Loans. The company has an unsecured electricity transmission facility loan which bears interest at 8.1%, with monthly principal and interest payments required through maturity in 2022. The outstanding principal balance was $2.0 million and $2.8 million as of December 31, 2019, and 2018, respectively. The company has an unused $3.0 million letter of credit in conjunction with this loan.

Outstanding Debt Maturities

Maturities of outstanding debt as of December 31, 2019, are as follows (in thousands):

2020	$	89,356
2021		3,679
2022		4,297
2023		403,703
2024		903,379
Thereafter		1,360,058
	$	2,764,472

The company capitalizes interest on all qualifying construction in progress assets. For the years ended December 31, 2019, 2018, and 2017, total interest costs incurred were $132.6 million, $129.5 million, and $136.1 million, respectively, of which $5.5 million, $2.9 million and $1.7 million, respectively, were capitalized.