Debt

12 Months Ended

Dec. 31, 2022

Debt Disclosure [Abstract]

Debt

Debt

Debt.

December 31,	2022		2021
5.125% Notes, due 2024	$	1,081	$	1,150
6.875% Notes, due 2025	600		600
5.900% Notes, due 2027	625		625
6.750% Bonds, due 2028	300		300
3.000% Notes, due 2029	700		700
5.950% Notes, due 2037	625		625
4.750% Iowa Finance Authority Loan, due 2042	250		250
Other(1)	(19)		(18)
	4,162		4,232
Less: amount due within one year	—		5
Total long-term debt	$	4,162	$	4,227

(1)Includes various financing arrangements related to subsidiaries, unamortized debt discounts and unamortized debt issuance costs related to outstanding notes and bonds listed in the table above.

The principal amount of long-term debt maturing in each of the next five years is $1,081 in 2024, $600 in 2025, $625 in 2027, and no debt maturities in each of 2023 and 2026.

Public Debt. In the second and fourth quarters of 2022, the Company repurchased in the open market approximately $69 aggregate principal amount of its 5.125% Notes due October 2024 (the “5.125% Notes”) and paid approximately $71, including an early termination premium of approximately $2, which was recorded in Loss on debt redemption in the Statement of Consolidated Operations. In January 2023, the Company repurchased approximately $26 aggregate principal amount of additional 5.125% Notes in the open market.

In the third and fourth quarters of 2021, the Company repurchased an additional $100 aggregate principal amount of its 5.125% Notes in the open market and paid approximately $111, including an early termination premium and accrued interest of approximately $10 and $1, respectively, which were recorded in Loss on debt redemption and Interest expense, net, respectively, in the Statement of Consolidated Operations.

On September 2, 2021, the Company completed a cash tender offer and repurchased approximately $600 aggregate principal amount of its 6.875% Notes due 2025 (the “6.875% Notes”). The amount of tender premium and accrued interest associated with the notes accepted for settlement were $105 and $14, respectively, which were recorded in Loss on debt redemption and Interest expense, net, respectively, in the Statement of Consolidated Operations.

On September 1, 2021, the Company completed an offering of $700 aggregate principal amount of 3.000% Notes due 2029, the proceeds of which were used to fund the cash tender offer noted above and to pay related transaction fees, including applicable premiums and expenses.

On May 3, 2021, the Company completed the early redemption of all the remaining $476 aggregate principal amount of its 5.870% Notes due 2022 (the “5.870% Notes”) and paid an aggregate of $503, including $5 of accrued interest. The Company also incurred an early termination premium and other costs of $23, which was recorded in Loss on debt redemption in the Statement of Consolidated Operations.

On January 15, 2021 the Company completed the early redemption of all the remaining $361 of its 5.400% Notes due 2021 (the “5.400% Notes”) at par and paid $5 in accrued interest.

On May 21, 2020, the Company completed a cash tender offer and repurchased $589 and $151 of principal amount of the 5.400% Notes and its 5.870% Notes, respectively. The amount of early tender premium and accrued interest associated with the notes accepted for early settlement were $24 and $4, respectively, which were recorded in Loss on debt redemption and Interest expense, net, respectively, in the Statement of Consolidated Operations.

On April 24, 2020, the Company completed an offering of $1,200 aggregate principal amount of 6.875% Notes, the proceeds of which have been used to fund the May 2020 cash tender offers noted above and to pay related transaction fees, including applicable premiums and expenses, with the remaining amount to be used for general corporate purposes. The Company incurred deferred financing costs of $14 associated with the issuance in the second quarter of 2020.

On April 6, 2020, the Company completed the early redemption of all $1,000 of its 6.150% Notes due 2020 (the “6.150% Notes”) and the early partial redemption of $300 of its 5.400% Notes. Holders of the 6.150% Notes were paid an aggregate of $1,020 and holders of the 5.400% Notes were paid an aggregate of $315, plus accrued and unpaid interest up to, but not including, the redemption date. The Company incurred early termination premium and accrued interest of $35 and $17, respectively, which were recorded in Loss on debt redemption and Interest expense, net, respectively, in the Statement of Consolidated Operations.

The Company has the option to redeem certain of its notes and bonds in whole or part, at any time at a redemption price equal to the greater of principal amount or the sum of the present values of the remaining scheduled payments, discounted using a defined treasury rate plus a spread, plus in either case accrued and unpaid interest to the redemption date.

Credit Facility. On September 28, 2021, the Company amended and restated its Five-Year Revolving Credit Agreement (as so amended and restated, the “Credit Agreement”). Capitalized terms used in this “Credit Facility” section but not otherwise defined shall have the meanings given to such terms in the Credit Agreement.

The Credit Agreement provides a $1,000 senior unsecured revolving credit facility (the “Credit Facility”) that matures on September 28, 2026, unless extended or earlier terminated in accordance with the provisions of the Credit Agreement. Howmet may make two one-year extension requests during the term of the Credit Facility, subject to the lender consent requirements set forth in the Credit Agreement. Subject to the terms and conditions of the Credit Agreement, the Company may from time to time request increases in lender commitments under the Credit Facility, not to exceed $500 in aggregate principal amount, and may also request the issuance of letters of credit, subject to a letter of credit sublimit of $500 of the Credit Facility. Under the provisions of the Credit Agreement, based on Howmet’s current long-term debt ratings, Howmet pays an annual fee of 0.23% of the total commitment to maintain the Credit Facility.

The Credit Facility is unsecured and amounts payable under it will rank pari passu with all other unsecured, unsubordinated indebtedness of Howmet. Borrowings under the Credit Facility may be denominated in U.S. dollars or euros. On February 13, 2023, the Company amended the Credit Agreement to replace LIBOR with Term SOFR as the reference rate for U.S. dollar-denominated loans. Loans under the Credit Agreement will bear interest at a base rate or, in the case of U.S. dollar-denominated loans, a rate equal to Term SOFR plus adjustment or, in the case of euro-denominated loans, the Euro inter-bank offered rate (“EURIBOR”), plus, in each case, an applicable margin based on the credit ratings of Howmet’s outstanding senior unsecured long-term debt. Based on Howmet’s current long-term debt ratings, the applicable margin on base rate loans would be 0.40% per annum and the applicable margin on Term SOFR loans and EURIBOR loans would be 1.40% per annum. The applicable margin is subject to change based on the Company’s long-term debt ratings. Loans may be prepaid without premium or penalty, subject to customary breakage costs.

The obligation of Howmet to pay amounts outstanding under the Credit Facility may be accelerated upon the occurrence of an “Event of Default” as defined in the Credit Agreement. Such Events of Default include, among others, (a) non-payment of obligations; (b) breach of any representation or warranty in any material respect; (c) non-performance of covenants and obligations; (d) with respect to other indebtedness in a principal amount in excess of $100, a default thereunder that causes such indebtedness to become due prior to its stated maturity or a default in the payment at maturity of any principal of such indebtedness; (e) the bankruptcy or insolvency of Howmet; and (f) a change in control of Howmet.

Under the Credit Agreement, the Company’s ratio of Consolidated Net Debt to Consolidated EBITDA as of the end of each fiscal quarter for the period of the four fiscal quarters of the Company most recently ended, is required to be no greater than 3.50 to 1.00.

During the Covenant Relief Period, which ended on December 31, 2022, the Company was required to maintain a Consolidated Net Debt to Consolidated EBITDA ratio of no greater than 5.00 to 1.00 as of the end of the fiscal quarter for the period of four fiscal quarters ended September 30, 2021, stepping down as of the end of each fiscal quarter to 3.75 to 1.00 as of December 31, 2022. In addition, during the Covenant Relief Period, common stock dividends and share repurchases (see Note J) were permitted only if no loans under the Credit Agreement were outstanding at the time and were limited to an aggregate amount not to exceed $500 during the year ended December 31, 2022. Common stock dividends and share repurchases were $442 during the year ended December 31, 2022. Following the end of the Covenant Relief Period, the restriction on common stock dividends and share repurchases under the Credit Agreement, along with certain covenants, no longer applies.

The Credit Agreement includes additional covenants, including, among others, (a) limitations on Howmet’s ability to incur liens securing indebtedness for borrowed money, (b) limitations on Howmet’s ability to consummate a merger, consolidation or sale of all or substantially all of its assets, and (c) limitations on Howmet’s ability to change the nature of its business.

There were no amounts outstanding under the Credit Agreement at December 31, 2022 and 2021, and no amounts were borrowed during 2022, 2021 or 2020 under the Credit Agreement. At December 31, 2022, the Company was in compliance with all covenants under the Credit Agreement. Availability under the Credit Agreement could be reduced in future periods if the Company fails to maintain the required ratios referenced above.

In addition to the Credit Agreement, the Company had several other credit agreements that provided a borrowing capacity of $640 as of December 31, 2019, and all of which expired in 2020. In 2020, nothing was borrowed or repaid under these arrangements.

Short-Term Debt. At December 31, 2022 and 2021, short-term debt was zero and $5, respectively, substantially all of which related to accounts payable settlement arrangements with certain vendors and third-party intermediaries. These arrangements provide that, at the vendor’s request, the third-party intermediary advances the amount of the scheduled payment to the vendor, less an appropriate discount, before the scheduled payment date, and Howmet makes payment to the third-party intermediary on the date stipulated in accordance with the commercial terms negotiated with its vendors. Howmet records imputed interest related to these arrangements in Interest expense, net in the Statement of Consolidated Operations.