K. Debt

Long-Term Debt.


December 31,	2013		2012
6.00% Notes, due 2013	$	-	$	422
5.25% Convertible Notes, due 2014		575		575
5.55% Notes, due 2017		750		750
6.50% Bonds, due 2018		250		250
6.75% Notes, due 2018		750		750
5.72% Notes, due 2019		750		750
6.150% Notes, due 2020		1,000		1,000
5.40% Notes, due 2021		1,250		1,250
5.87% Notes, due 2022		627		627
5.90% Notes, due 2027		625		625
6.75% Bonds, due 2028		300		300
5.95% Notes due 2037		625		625
BNDES Loans, due 2014-2029 (see below for weighted average rates)		325		397
Iowa Finance Authority Loan, due 2042 (4.75%)		250		250
Other*		185		205
Less: amount due within one year		8,262 655		8,776 465
	$	7,607	$	8,311

Other includes various financing arrangements related to subsidiaries, unamortized debt discounts related to the outstanding notes and bonds listed in the table above, a beneficial conversion feature related to the convertible notes, and adjustments to the carrying value of long-term debt related to interest swap contracts accounted for as fair value hedges (see Derivatives in Note X).

The principal amount of long-term debt maturing in each of the next five years is $658 in 2014, $30 in 2015, $30 in 2016, $778 in 2017, and $1,046 in 2018.

Public Debt—In May 2013, Alcoa elected to call for redemption the $422 in outstanding principal of its 6.00% Notes due July 2013 (the “Notes”) under the provisions of the Notes. The total cash paid to the holders of the called Notes was $435, which includes $12 in accrued and unpaid interest from the last interest payment date up to, but not including, the settlement date, and a $1 purchase premium. The purchase premium was recorded in Interest expense on the accompanying Statement of Consolidated Operations. This transaction was completed on June 28, 2013.

In January 2012, Alcoa repaid the $322 in outstanding principal of its 6.00% Notes as scheduled using available cash on hand.

In August 2012, Alcoa and the Iowa Finance Authority entered into a loan agreement for the proceeds from the issuance of $250 in Midwestern Disaster Area Revenue Bonds Series 2012 due 2042 (the “Bonds”). The Bonds were issued by the Iowa Finance Authority pursuant to the Heartland Disaster Tax Relief Act of 2008 for the purpose of financing all or part of the cost of acquiring, constructing, reconstructing, and renovating certain facilities at Alcoa’s rolling mill plant in Davenport, IA. Alcoa received $248 in net proceeds (reflecting payment of financing costs), which was classified as restricted cash. This transaction is not reflected in the accompanying Statement of Consolidated Cash Flows as it represents a non-cash financing and investing activity. At December 31, 2013 and 2012, Alcoa had $13 and $171, respectively, of restricted cash remaining, all of which was classified in Prepaid expenses and other current assets on the accompanying Consolidated Balance Sheet. Interest on the Bonds is at a rate of 4.75% per annum and is paid semi-annually in February and August, which commenced in February 2013. Alcoa has the option through the loan agreement to redeem the Bonds, as a whole or in part, on or after August 1, 2022, on at least 30 days, but not more than 60 days, prior notice to the holders of the Bonds at a redemption price equal to 100% of the principal amount thereof, without premium, plus accrued interest, if any, to the redemption date. The loan agreement ranks pari passu with Alcoa’s other unsecured senior unsubordinated indebtedness.

In February 2011, Alcoa filed an automatic shelf registration statement with the Securities and Exchange Commission for an indeterminate amount of securities for future issuance. This shelf registration statement replaced Alcoa’s existing shelf registration statement (filed in March 2008). As of December 31, 2013 and 2012, $1,250 in senior debt securities were issued under the current shelf registration statement.

BNDES Loans—Prior to 2012, Alcoa Alumínio (Alumínio) finalized certain documents related to a loan agreement with Brazil’s National Bank for Economic and Social Development (BNDES). This loan agreement provides for a commitment of $397 (R$687), which is divided into three subloans, and was used to pay for certain expenditures of the Estreito hydroelectric power project. Interest on the three subloans is a Brazil real rate of interest equal to BNDES’ long-term interest rate, 5.00% as of December 31, 2013 and 2012, plus a weighted-average margin of 1.48%. Principal and interest are payable monthly, which began in October 2011 and end in September 2029 for two of the subloans totaling R$667 and began in July 2012 and end in June 2018 for the subloan of R$20. This loan may be repaid early without penalty with the approval of BNDES.

As of December 31, 2013 and 2012, Alumínio’s outstanding borrowings were $254 (R$599) and $311 (R$637), respectively, and the weighted-average interest rate was 6.49%. During 2013 and 2012, Alumínio repaid $22 (R$47) and $20 (R$38), respectively, of outstanding borrowings. Additionally, Alumínio borrowed $1 (R$2) and $7 (R$13), under the loan in 2013 and 2012, respectively.

In December 2012, Alumínio finalized certain documents related to another loan agreement with BNDES. This loan agreement provides for a commitment of $85 (R$177) and also was used to pay for certain expenditures of the Estreito hydroelectric power project. Due to the timing of the finalization of the loan documents and the expenditures of the project, Alumínio advanced the cash necessary to the consortium to pay for the expenditures supported by this loan. Interest on the loan is a Brazil real rate of interest equal to BNDES’ long-term interest rate plus a margin of 1.55%. Principal and interest are payable monthly, which began in January 2013 and end in September 2029. This loan may be repaid early without penalty with the approval of BNDES. As of December 31, 2013 and 2012, Alumínio’s outstanding borrowings were $71 (R$166) and $86 (R$177), respectively, and the interest rate was 6.55%. During 2013, Alumínio repaid $5 (R$11) of outstanding borrowings.

Previously, Alumínio had two other separate loan agreements (the “First Loans”) with BNDES, which provided a combined commitment of $622 (R$1,150) and were used to pay for certain expenditures of the Juruti bauxite mine development and the São Luís refinery expansion. During 2012, Alumínio repaid the remaining $252 (R$511) of outstanding borrowings related to the First Loans, which were repaid early without penalty under the approval of BNDES. With the full repayment of the First Loans, the commitments were effectively terminated.

Credit Facilities. Alcoa maintains a Five-Year Revolving Credit Agreement, dated July 25, 2011, (the “Credit Agreement”) with a syndicate of lenders and issuers named therein. The Credit Agreement provides a $3,750 senior unsecured revolving credit facility (the “Credit Facility”), the proceeds of which are to be used to provide working capital or for other general corporate purposes of Alcoa. Subject to the terms and conditions of the Credit Agreement, Alcoa 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 $1,000 under the Credit Facility.

The Credit Facility was scheduled to mature on July 25, 2016; however, on December 7, 2012, Alcoa received approval for a one-year extension of the maturity date by the lenders and issuers that support $3,700 of the Credit Facility (approval for the remaining $50 was received on January 8, 2013). As such, the Credit Facility now matures on July 25, 2017, unless extended or earlier terminated in accordance with the provisions of the Credit Agreement. Alcoa may make one additional one-year extension request during the remaining term of the Credit Facility, subject to the lender consent requirements set forth in the Credit Agreement. Under the provisions of the Credit Agreement, Alcoa will pay a fee of 0.25% (based on Alcoa’s long-term debt ratings as of December 31, 2013) of the total commitment per annum 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 Alcoa. Borrowings under the Credit Facility may be denominated in U.S. dollars or euros. Loans will bear interest at a base rate or a rate equal to LIBOR, plus, in each case, an applicable margin based on the credit ratings of Alcoa’s outstanding senior unsecured long-term debt. The applicable margin on base rate loans and LIBOR loans will be 0.50% and 1.50% per annum, respectively, based on Alcoa’s long-term debt ratings as of December 31, 2013. Loans may be prepaid without premium or penalty, subject to customary breakage costs.

The Credit Agreement includes the following covenants, among others, (a) a leverage ratio, (b) limitations on Alcoa’s ability to incur liens securing indebtedness for borrowed money, (c) limitations on Alcoa’s ability to consummate a merger, consolidation or sale of all or substantially all of its assets, and (d) limitations on Alcoa’s ability to change the nature of its business. As of December 31, 2013 and 2012, Alcoa was in compliance with all such covenants.

The obligation of Alcoa 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) Alcoa’s failure to pay the principal of, or interest on, borrowings under the Credit Facility, (b) any representation or warranty of Alcoa in the Credit Agreement proving to be materially false or misleading, (c) Alcoa’s breach of any of its covenants contained in the Credit Agreement, and (d) the bankruptcy or insolvency of Alcoa.

There were no amounts outstanding at December 31, 2013 and 2012 and no amounts were borrowed during 2013 or 2012 under the Credit Facility.

In 2012, Alcoa entered into two term loan agreements and six revolving credit agreements, providing a combined borrowing capacity of $990, each with a different financial institution. The two term loan agreements (totaling $350) and one of the revolving credit agreements ($150) were terminated during 2012 and 2013, respectively, upon repayment of existing borrowings. Also, in 2013, four of the revolving credit agreements were due to expire, and, therefore, were extended to September 2014 through September 2015.

In 2013, Alcoa entered into five additional credit arrangements, one term loan agreement (later replaced with a revolving credit agreement) and four revolving credit agreements, providing a combined borrowing capacity of $700, each with a different financial institution. These five additional revolving credit agreements expire between February 2014 and December 2014 (two of these agreements were originally due to expire in 2013).

The purpose of any borrowings under all arrangements in both 2013 and 2012 was to provide working capital and for other general corporate purposes, including contributions to Alcoa’s pension plans. The covenants contained in all the arrangements are the same as the Credit Agreement (see above).

In 2013 and 2012, Alcoa borrowed and repaid $1,850 and $600, respectively, under the respective credit arrangements. The weighted-average interest rate and weighted-average days outstanding of the respective borrowings during 2013 and 2012 were 1.57% and 1.89%, respectively, and 213 days and 260 days, respectively.

In summary, at December 31, 2013, Alcoa has ten revolving credit facilities (excluding the Credit Facility above), providing a combined capacity of $1,190, of which $1,040 is due to expire in 2014 and $150 is due to expire in 2015.

Short-Term Borrowings. At December 31, 2013 and 2012, Short-term borrowings were $57 and $53, respectively. These amounts included $52 and $48 at December 31, 2013 and 2012, respectively, 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 Alcoa makes payment to the third-party intermediary on the date stipulated in accordance with the commercial terms negotiated with its vendors. Alcoa records imputed interest related to these arrangements as interest expense in the Statement of Consolidated Operations.

During 2013 and 2012, Alcoa’s subsidiary, Alumínio, borrowed and repaid a total of $52 and $280, respectively, in new loans with a weighted-average interest rate of 0.72% and 2.32%, respectively, and a weighted-average maturity of 70 days and 172 days, respectively, from two financial institutions. The purpose of these borrowings was to support Alumínio’s export operations.

Commercial Paper. Alcoa had no outstanding commercial paper at December 31, 2013 and 2012. In 2013 and 2012, the average outstanding commercial paper was $242 and $354, respectively. Commercial paper matures at various times within one year and had an annual weighted average interest rate of 0.8% during each of 2013, 2012, and 2011.