Short-Term and Long-Term Debt

6 Months Ended

Jun. 30, 2015

Short-Term and Long-Term Debt [Abstract]

Short-Term and Long-Term Debt [Text Block]

SHORT-TERM AND LONG-TERM DEBT

Short-Term Debt. As of June 30, 2015, total short-term debt outstanding was $118.0 million and consisted of long-term debt due within one year. Short-term debt outstanding as of December 31, 2014 was $104.4 million and consisted of long-term debt due within one year and notes payable.

Long-Term Debt. There were no material issuances of long-term debt in the first six months of 2015. As of June 30, 2015, total long-term debt outstanding was $1,272.4 million ($1,272.8 million as of December 31, 2014).

On July 1, 2015, ALLETE Clean Energy assumed $60.9 million of long-term debt, including $5.9 million due within one year, in conjunction with ALLETE Clean Energy’s acquisition of Armenia Mountain. (See Note 4. Acquisitions.)

On July 14, 2015, we agreed to sell $100.0 million of the Company's first mortgage bonds (Bonds) to certain institutional buyers in the private placement market. The Bonds will be sold in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended, to institutional accredited investors. The Bonds will be issued on or about September 24, 2015, in two series as follows:

Maturity Date	Principal Amount	Interest Rate
September 15, 2020	$40 Million	2.80%
September 16, 2030	$60 Million	3.86%

Interest on the Bonds will be payable semi-annually on March 15 and September 15 of each year, commencing on March 15, 2016.The Company will have the option to prepay all or a portion of the Bonds at its discretion, subject to a make-whole provision; however, the September 16, 2030, series of bonds will be redeemable at par, including accrued and unpaid interest, six months prior to the maturity date. The Bonds will be subject to additional terms and conditions which are customary for these types of transactions. The Company intends to use the proceeds from the sale of the Bonds to fund utility capital expenditures and/or for general corporate purposes.

NOTE 10.  SHORT-TERM AND LONG-TERM DEBT (Continued)

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 June 30, 2015, our ratio was approximately 0.44 to 1.00. Failure to meet this covenant would give rise to an event of default if not cured after notice from the 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 June 30, 2015, ALLETE was in compliance with its financial covenants.