SHORT-TERM AND LONG-TERM DEBT

Short-Term Debt. As of September 30, 2013, total short-term debt outstanding was $38.9 million ($84.5 million as of December 31, 2012) and consisted of long-term debt due within one year and notes payable. Short-term debt as of December 31, 2012 included $60.0 million of long-term debt that matured in April 2013.

Long-Term Debt. As of September 30, 2013, total long-term debt outstanding was $1,064.2 million ($933.6 million as of December 31, 2012).

On April 2, 2013, we issued $150.0 million of the Company’s First Mortgage Bonds (Bonds) in the private placement market in three series as follows:



Maturity Date	Principal Amount	Interest Rate
April 15, 2018	$50 Million	1.83%
October 15, 2028	$40 Million	3.30%
October 15, 2043	$60 Million	4.21%

We have the option to prepay all or a portion of the 1.83 percent Bonds at our discretion at any time, subject to a make-whole provision. We have the option to prepay all or a portion of the 3.30 percent Bonds at our discretion at any time prior to April 15, 2028, subject to a make-whole provision, and at any time on or after April 15, 2028, at par, including, in each case, accrued and unpaid interest. We also have the option to prepay all or a portion of the 4.21 percent Bonds at our discretion at any time prior to April 15, 2043, subject to a make-whole provision, and at any time on or after April 15, 2043, at par, including, in each case, accrued and unpaid interest. The Bonds are subject to additional terms and conditions of our utility mortgage. Proceeds from the sale of the Bonds will be used to fund utility capital investments, repay debt, and/or for general corporate purposes. The Bonds were sold in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended, to certain institutional accredited investors in a private placement.

NOTE 8. SHORT-TERM AND LONG-TERM DEBT (Continued)

On August 26, 2013, we amended our $75.0 million Term Loan with JPMorgan Chase Bank, N.A. (Term Loan). The Term Loan was amended to extend the maturity date an additional year to August 25, 2015, and to lower the interest rate to the one-month LIBOR plus 0.875 percent. There was no change to the original interest rate swap agreement which remains in effect through August 25, 2014, and effectively fixes the interest rate for the amended Term Loan at 1.70 percent through August 25, 2014. We also entered into a new interest swap agreement covering the final year of the amended Term Loan which effectively fixes the interest rate at 1.625 percent from August 26, 2014, through August 25, 2015. (See also Note 4. Derivatives.)

Financial Covenants. Our long-term debt arrangements contain customary covenants. In addition, our lines of credit and letters of credit supporting certain long-term debt arrangements contain financial covenants. Our compliance with financial covenants is not dependent on debt ratings. The most restrictive financial covenant requires ALLETE to maintain a ratio of Indebtedness to Total Capitalization (as the amounts are calculated in accordance with the respective long-term debt arrangements) of less than or equal to 0.65 to 1.00, measured quarterly. As of September 30, 2013, our ratio was approximately 0.46 to 1.00. Failure to meet this covenant would give rise to an event of default if not cured after notice from a lender, in which event ALLETE may need to pursue alternative sources of funding. Some of ALLETE’s debt arrangements contain “cross-default” provisions that would result in an event of default if there is a failure under other financing arrangements to meet payment terms or to observe other covenants that would result in an acceleration of payments due. As of September 30, 2013, ALLETE was in compliance with its financial covenants.