Short-Term and Long-Term Debt

3 Months Ended

Mar. 31, 2020

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

SHORT-TERM AND LONG-TERM DEBT

The following tables present the Company’s short-term and long-term debt as of March 31, 2020, and December 31, 2019:



March 31, 2020	Principal		Unamortized Debt Issuance Costs	Total
Millions
Short-Term Debt		$323.3	$(0.3)		$323.0
Long-Term Debt	1,408.0		(8.1)	1,399.9
Total Debt		$1,731.3	$(8.4)		$1,722.9



December 31, 2019	Principal		Unamortized Debt Issuance Costs	Total
Millions
Short-Term Debt		$213.3	$(0.4)		$212.9
Long-Term Debt	1,409.3		(8.4)	1,400.9
Total Debt		$1,622.6	$(8.8)		$1,613.8

We had $66.3 million outstanding in standby letters of credit and $0.2 million in outstanding draws under our lines of credit as of March 31, 2020 ($62.0 million in standby letters of credit and no outstanding draws as of December 31, 2019).

On January 10, 2020, ALLETE entered into a $200 million unsecured term loan agreement (Term Loan) of which we have borrowed $110 million as of March 31, 2020. The Term Loan provides for the ability to borrow up to an additional $90 million, is due on February 10, 2021, and may be repaid at any time. Interest is payable monthly at a rate per annum equal to LIBOR plus 0.55 percent. Proceeds from the Term Loan will be used for construction-related expenditures.

On March 26, 2020, ALLETE agreed to sell first mortgage bonds (Bonds) to certain institutional buyers in the private placement market, which will be issued on or before August 3, 2020, in two series as follows:



Maturity Date	Principal Amount	Interest Rate
August 1, 2030	$46 Million	2.50%
August 1, 2050	$94 Million	3.30%

ALLETE will have the option to prepay all or a portion of the Bonds at its discretion, subject to a make-whole provision. The Bonds will be subject to additional terms and conditions which are customary for these types of transactions. ALLETE plans to use the proceeds from the sale of the Bonds to fund utility capital investment and for general corporate purposes. 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.

On April 8, 2020, ALLETE entered into a $115 million unsecured term loan agreement (Term Loan) and borrowed $95 million upon execution. The Term Loan provides for an additional draw of $20 million on or after July 1, 2020. The Term Loan is due on April 7, 2021, and may be repaid at any time. Interest is payable monthly at a rate per annum equal to LIBOR plus 1.7 percent with a LIBOR floor of 0.75 percent. Proceeds from the Term Loan will be used for general corporate purposes.

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 March 31, 2020, 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. ALLETE has no significant restrictions on its ability to pay dividends from retained earnings or net income. As of March 31, 2020, ALLETE was in compliance with its financial covenants.