Long-Term Debt

12 Months Ended

Dec. 31, 2021

Long-Term Debt

Long-Term Debt

Note 3. Long-Term Debt

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

	2021		2020
2.800% senior notes due 2024	$	400,000	$	400,000
2.400% senior notes due 2025		400,000		400,000
5.000% senior notes due 2026		400,000		400,000
1.650% senior notes due 2027		350,000		350,000
3.450% senior notes due 2030		600,000		600,000
3.250% senior notes due 2031		500,000		500,000
3.250% senior notes due 2050		400,000		400,000
Other obligations		105,422		108,658
Total debt		3,155,422		3,158,658
Less debt issuance costs and original issue discounts		49,546		55,982
Total amounts outstanding		3,105,876		3,102,676
Less current maturities		97,174		86,894
Long-term debt	$	3,008,702	$	3,015,782

Senior Credit Facility due 2024

The company has an 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. Subject to certain conditions, the company has the opportunity to increase the Facility size by $500.0 million. The unsecured Revolver 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 certain assets. The company’s ability to borrow funds within the terms of the unsecured Revolver is dependent upon its continued compliance with the financial and other covenants. At December 31, 2021, the company had $1.2 billion of availability on the Revolver, $12.0 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 the company’s 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.

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 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, 2021, the company’s interest coverage ratio and debt to capitalization ratio were 45.04:1.00 and 0.33:1.00, respectively. The company was, therefore, in compliance with these covenants at December 31, 2021, and anticipates remaining in compliance during the next twelve months.

Senior Unsecured Notes

The company has seven 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.

Note 3. Long-Term Debt (Continued)

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 $400.0 million of 2.400% senior notes due 2025 mature on June 15, 2025, with interest payable semi-annually. Early redemption is permitted as follows: any time prior to May 15, 2025, at a make-whole price of the remaining payments to be made discounted at the applicable U.S. Treasury rate plus 0.35%; and as of May 15, 2025, 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: 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 $350.0 million of 1.650% senior notes due 2027 mature on October 15, 2027, with interest payable semi-annually. Early redemption is permitted as follows: any time prior to August 15, 2027, 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 August 15, 2027, 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%.

Our $500.0 million of 3.250% senior notes due 2031 mature on January 15, 2031, with interest payable semi-annually. Early redemption is permitted as follows: any time prior to October 15, 2030, at a make-whole price of the remaining payments to be made discounted at the applicable U.S. Treasury rate plus 0.40%; and as of October 15, 2030, at 100.000%.

Our $400.0 million of 3.250% senior notes due 2050 mature on October 15, 2050, with interest payable semi-annually. Early redemption is permitted as follows: any time prior to April 15, 2050, at a make-whole price of the remaining payments to be made discounted at the applicable U.S. Treasury rate plus 0.30%; and as of April 15, 2050, at 100.000%.
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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 4.7%, with monthly principal and interest payments required through 2028. The outstanding principal balance of these agreements was $10.4 million and $9.6 million at December 31, 2021, and 2020, respectively.

One of the company’s controlled subsidiaries has a secured credit agreement, which matures in August 2024, and provides a revolving variable rate credit facility of up to $100.0 million, subject to a borrowing base determined from eligible accounts receivable and inventory, and is further secured with $30.0 million of letter of credit support from Steel Dynamics, Inc. Interest, which was 1.6% at December 31, 2021, is payable monthly. Amounts due under the credit facility were $94.4 million and $82.3 million at December 31, 2021, and 2020, respectively.

Note 3. Long-Term Debt (Continued)

Another of the company’s controlled subsidiaries has a secured credit agreement, which matures in March 2023, and provides a revolving variable rate credit facility of up to $25.0 million, subject to a borrowing base determined from eligible accounts receivable and inventory. Interest, which was 3.0% at December 31, 2021, is payable monthly. There were no amounts due under the credit facility at December 31, 2021 or 2020.

Mesabi Nugget had loans from various Minnesota state agencies related to the construction and ultimate operation of Mesabi Nugget that were paid off in full during 2021. Amounts due under these loans were zero and $15.2 million at December 31, 2021, and 2020, respectively.

Outstanding Debt Maturities

Maturities of outstanding debt as of December 31, 2021, are as follows (in thousands):

2022	$	97,174
2023		2,081
2024		401,621
2025		401,562
2026		401,481
Thereafter		1,851,503
	$	3,155,422

The company capitalizes interest on all qualifying construction in progress assets. For the years ended December 31, 2021, 2020, and 2019, total interest costs incurred were $107.7 million, $118.8 million, and $132.6 million, respectively, of which $50.5 million, $23.9 million and $5.5 million, respectively, were capitalized.

Financing Activity

In October 2020, the company issued $350.0 million of 1.650% notes due 2027 and $400.0 million of 3.250% notes due 2050. The net proceeds from these notes were used to fund the October 2020 call and redemption of the $350.0 million outstanding principal amount of the company’s 4.125% senior notes due 2025 at a redemption price of 102.063%, plus accrued and unpaid interest to, but not including, the date of redemption, and for general corporate purposes. The company recorded expenses related to premiums and write off of unamortized debt issuance costs of approximately $10.3 million, which are reflected in other expenses in the consolidated statement of income for the year ended December 31, 2020.

In June 2020, the company issued $400.0 million of 2.400% notes due 2025 and $500.0 million of 3.250% notes due 2031. The net proceeds from these notes were used to fund the June 2020 call and redemption of the $400.0 million outstanding principal amount of the company’s 5 1/4% senior notes due 2023 at a redemption price of 100.875%, and the $500.0 million outstanding principal amount of the company’s 5.500% senior notes due 2024 at a redemption price of 102.750%, plus accrued and unpaid interest to, but not including, the date of redemption. The company recorded expenses related to premiums, write off of unamortized debt issuance costs, and other expenses of approximately $22.8 million, which are reflected in other expenses in the consolidated statement of income for the year ended December 31, 2020.

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 redemption of the $700.0 million outstanding principal amount of the company’s 5.125% senior notes due 2021 at a redemption price of 100.000%, plus accrued and unpaid interest to, but not including, the date of repayment, and for 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 statement of income for the year ended December 31, 2019.