Short-Term and Long-Term Debt

6 Months Ended

Jun. 30, 2017

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

SHORT-TERM AND LONG-TERM DEBT

The following tables present ALLETE’s short-term and long-term debt as of June 30, 2017, and December 31, 2016:



June 30, 2017	Principal		Unamortized Debt Issuance Costs	Total
Millions
Short-Term Debt		$118.2	$(0.5)		$117.7
Long-Term Debt	1,411.4		(10.0)	1,401.4
Total Debt		$1,529.6	$(10.5)		$1,519.1



December 31, 2016	Principal		Unamortized Debt Issuance Costs	Total
Millions
Short-Term Debt		$188.3	$(0.6)		$187.7
Long-Term Debt	1,380.8		(10.4)	1,370.4
Total Debt		$1,569.1	$(11.0)		$1,558.1

On June 1, 2017, ALLETE issued $80.0 million of its senior unsecured notes (the Notes) to certain institutional buyers in the private placement market. The Notes were issued 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 Notes bear interest at 3.11 percent and mature on June 1, 2027. Interest on the Notes is payable semi-annually on June 1 and December 1 of each year, commencing on December 1, 2017. ALLETE has the option to prepay all or a portion of the Notes at its discretion, subject to a make-whole provision. The Notes are subject to additional terms and conditions which are customary for these types of transactions. Proceeds from the sale of the Notes may be used to redeem debt, fund corporate growth opportunities and for general corporate purposes.

NOTE 8. 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, 2017, our ratio was approximately 0.43 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, 2017, ALLETE was in compliance with its financial covenants.