Long-term Debt and Other Financing (Notes)

3 Months Ended

Mar. 31, 2017

Debt balances at March 31, 2017, and December 31, 2016, are presented below:



	March 31, 2017			December 31, 2016
Credit Facility	$	—		$	—
7.50% Senior Secured Notes due July 2023 (effective rate of 8.3%)	380.0			380.0
5.00% Exchangeable Senior Notes due November 2019 (effective rate of 10.8%)	150.0			150.0
7.625% Senior Notes due May 2020 (to be redeemed May 2017)	168.5			529.8
7.625% Senior Notes due October 2021	406.2			406.2
8.375% Senior Notes due April 2022	279.8			279.8
7.00% Senior Notes due March 2027	400.0			—
Industrial Revenue Bonds due 2020 through 2028	99.3			99.3
Capital lease for Research and Innovation Center	25.2			25.2
Unamortized debt discount/premium and debt issuance costs	(56.0		)	(53.7		)
Total debt	1,853.0			1,816.6
Less:
Current portion of long-term debt	168.5			—
Total long-term debt	$	1,684.5		$	1,816.6

During the three months ended March 31, 2017, we were in compliance with all the terms and conditions of our debt agreements.

Credit Facility

We have a $1,500.0 revolving credit facility (the “Credit Facility”), which expires in March 2019 and is guaranteed by AK Holding and by AK Tube LLC (“AK Tube”), AK Steel Properties, Inc. (“AK Properties”) and Mountain State Carbon LLC (“Mountain State Carbon”), three 100%-owned subsidiaries of AK Steel (referred to together as the “Subsidiary Guarantors”). The Credit Facility contains common restrictions, including limitations on, among other things, distributions and dividends, acquisitions and investments, indebtedness, liens and affiliate transactions. The Credit Facility requires that we maintain a minimum fixed charge coverage ratio of one to one if availability under the Credit Facility is less than $150.0. The Credit Facility’s current availability significantly exceeds $150.0. Availability is calculated as the lesser of the Credit Facility commitment or eligible collateral after advance rates, less outstanding revolver borrowings and letters of credit. We secure our Credit Facility obligations with our inventory and accounts receivable, and the Credit Facility’s availability fluctuates monthly based on the varying levels of eligible collateral. We do not expect any of these restrictions to affect or limit our ability to conduct business in the ordinary course. The Credit Facility includes a separate “first-in, last-out”, or “FILO” tranche, which allows us to use a portion of our eligible collateral at higher advance rates.

As of March 31, 2017, there were no outstanding borrowings under the Credit Facility. At March 31, 2017, our eligible collateral, after application of applicable advance rates, was $1,352.0. Availability as of March 31, 2017 was reduced by $70.7 for outstanding letters of credit, resulting in remaining availability of $1,281.3.

Senior Unsecured Notes

In March 2017, AK Steel issued $400.0 aggregate principal amount of 7.00% Senior Unsecured Notes due March 2027 (the “2027 Notes”) and generated net proceeds of $394.0 after underwriting discount. The 2027 Notes are fully and unconditionally guaranteed by AK Holding and by the Subsidiary Guarantors. We used a portion of the net proceeds to pay the cash tender offer of our 7.625% Senior Unsecured Notes due May 2020 (the “2020 Notes”), as further discussed below. Similar to our other senior unsecured notes, the indenture governing the 2027 Notes includes covenants with customary restrictions on (a) the incurrence of additional debt by certain subsidiaries, (b) the incurrence of certain liens, (c) the incurrence of sale/leaseback transactions, and (d) our ability to merge or consolidate with other entities or to sell, lease or transfer all or substantially all of our assets to another entity. The 2027 Notes also contain customary events of default. Before March 15, 2022, we may redeem the 2027 Notes at a price equal to par plus a make-whole premium and all accrued and unpaid interest to the date of redemption. After that date, we may redeem them at 103.500% until March 15, 2023, 102.333%

thereafter until March 15, 2024, 101.167% thereafter until March 15, 2025, and 100.000% thereafter, together with all accrued and unpaid interest to the date of redemption.

Concurrently with the issuance of the 2027 Notes, we repurchased $361.3 of 2020 Notes through a cash tender offer (the “Tender Offer”) at a tender price equal to 102.125% of principal plus accrued and unpaid interest. We also issued a notice of redemption providing that, as of May 15, 2017, we will redeem all 2020 Notes that were not tendered and remained outstanding following the Tender Offer at a redemption price of 101.271% plus accrued and unpaid interest (the “2020 Notes Redemption”). We will use the remaining proceeds received from the issuance of the 2027 Notes, together with cash on hand and borrowings under our Credit Facility, as necessary, to effect the 2020 Notes Redemption. In the first quarter of 2017, we recognized other expense of $9.7 for expenses related to the Tender Offer and the write-off of unamortized debt discount and issue costs related to the 2020 Notes. We expect to record additional expense of approximately $3.4 in the second quarter of 2017 related to the call premium paid on the 2020 Notes Redemption and the write-off of unamortized debt discount and issuance costs related to the remaining 2020 Notes being redeemed in May 2017. Fees paid to holders of the 2020 Notes to tender their notes and expenses paid to third parties related to the issuance of the 2027 Notes, totaling approximately $7.5, will be recognized as an adjustment of the carrying amount of the 2027 Notes and amortized over their term as an adjustment to interest expense.

Exchangeable Notes

AK Steel has outstanding 5.0% Exchangeable Senior Notes due 2019 (the “Exchangeable Notes”). The indenture governing the Exchangeable Notes provides holders with an exchange right at their option before August 15, 2019, if the closing price of our common stock is greater than or equal to $7.02 per share (130% of the exchange price of the Exchangeable Notes) for at least 20 trading days during the last 30 consecutive trading days of a calendar quarter. As of April 1, 2017, this exchange right was triggered and will remain available until June 30, 2017. Thereafter, the triggering condition will be reassessed at the beginning of each quarter while any Exchangeable Notes remain outstanding. We would be required to pay cash to holders for the principal amount of the Exchangeable Notes and to pay cash or issue common stock (at our option) for the premium if any holders elect to exchange their Exchangeable Notes. As a result of meeting this trigger at April 1, 2017 and January 1, 2017, a portion of the equity component of the Exchangeable Notes, calculated as the difference between the principal amount of the Exchangeable Notes and the carrying amount of the liability component of the Exchangeable Notes, was considered redeemable and classified as temporary equity of $19.7 and $21.3 on the condensed consolidated balance sheets at March 31, 2017 and December 31, 2016. The value of the Exchangeable Notes if exchanged as of March 31, 2017, would have exceeded the principal amount by $63.6.