Debt

Debt at December 31, 2015 and 2014 was as follows:



(In millions)	2015			2014
Allegheny Technologies $500 million 5.875% Senior Notes due 2023 (a)	$	500.0		$	500.0
Allegheny Technologies $500 million 5.95% Senior Notes due 2021	500.0			500.0
Allegheny Technologies $350 million 9.375% Senior Notes due 2019	350.0			350.0
Allegheny Ludlum 6.95% Debentures due 2025	150.0			150.0
Ladish Series B 6.14% Notes due 2016 (b)	—			11.9
Ladish Series C 6.41% Notes due 2015 (c)	—			10.3
U.S. revolving credit facilities	—			—
Foreign credit agreements	1.4			—
Industrial revenue bonds, due through 2020, and other	3.8			4.7
Debt issuance costs (d)	(9.5		)	(10.9		)
Total short-term and long-term debt	1,495.7			1,516.0
Short-term debt and current portion of long-term debt	3.9			17.8
Total long-term debt	$	1,491.8		$	1,498.2


(a)	Bearing interest at 7.625% effective August 15, 2015.


(b)	Includes fair value adjustment of $0.4 million at December 31, 2014.


(c)	Includes fair value adjustment of $0.3 million at December 31, 2014.


(d)	In April 2015, the FASB issued new guidance on the presentation of debt issuance costs. This guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. The Company early adopted this new guidance on a retrospective basis in the fourth quarter of fiscal year 2015.

Interest expense was $111.4 million in 2015, $109.8 million in 2014, and $66.0 million in 2013. Interest expense was reduced by $2.2 million, $5.3 million, and $45.7 million, in 2015, 2014, and 2013, respectively, from interest capitalization on capital projects. Interest and commitment fees paid were $113.4 million in 2015, $113.2 million in 2014, and $110.6 million in 2013. Net interest expense includes interest income of $1.2 million in 2015, $1.1 million in 2014, and $0.8 million in 2013.

Scheduled principal payments during the next five years are $3.9 million in 2016, $0.9 million in 2017, $0.2 million in 2018, $350.2 million in 2019, and no payments in 2020.

2023 Notes

On July 12, 2013, ATI issued $500 million aggregate principal amount of 5.875% Senior Notes due 2023 (the “2023 Notes”). Interest on the 2023 Notes is payable semi-annually in arrears, and the 2023 Notes will mature on August 15, 2023, unless redeemed or repurchased earlier. Underwriting fees, discount, and other third-party expenses for the issuance of the 2023 Notes were $5.2 million in 2013, and are being amortized to interest expense over the 10-year term of the 2023 Notes. The 2023 Notes are unsecured and unsubordinated obligations of the Company and equally ranked with all of its existing and future senior unsecured debt. The stated interest rate payable on the 2023 Notes is subject to adjustment in the event of changes in the credit ratings on the 2023 Notes by either Moody’s or Standard & Poor’s (“S&P”). Each notch of credit rating downgrade increases interest expense by 0.25% on the 2023 Notes, up to a maximum 4 notches by each of the two credit rating agencies, or a total 2.0% potential interest rate change up to 7.875%, of which 1.75% interest rate change has occurred as of December 31, 2015.

During 2014, a one notch downgrade of the Company’s credit rating resulted in an increase of the interest rate on the 2023 Notes from 5.875% to 6.125% effective with the interest period beginning August 15, 2014. During 2015, additional downgrades of the Company’s credit rating resulted in increases to the interest rate on the 2023 Notes to 7.625%, effective for the interest period beginning August 15, 2015. These downgrades resulted in $4.1 million of additional interest expense for 2015. Therefore, one future downgrade of the Company’s credit rating by S&P could result in an additional increase to the interest cost with respect to the 2023 Notes by 0.25%. Any further credit rating downgrades have no effect on the interest rate of the 2023 Notes, and increases in the Company’s credit ratings from these rating agencies would reduce interest expense on the 2023 Notes to the original 5.875% interest rate in a similar manner.

Credit Agreements

On September 23, 2015, the Company entered into a $400 million Asset Based Lending (“ABL”) Revolving Credit Facility, which includes a letter of credit sub-facility of up to $200 million. The ABL facility replaced a $400 million revolving credit facility originally entered into on July 31, 2007 (as amended, the “Prior Credit Facility”). Costs associated with entering into the ABL facility were $1.5 million, and are being amortized to interest expense over the 5-year term of the facility. The ABL facility matures in September 2020 and is collateralized by the accounts receivable and inventory of the Company’s domestic operations. The applicable interest rate for borrowings under the ABL facility includes interest rate spreads based on available borrowing capacity that range between 1.25% and 1.75% for LIBOR-based borrowings and between 0.25% and 0.75% for base rate borrowings. Compared to the Prior Credit Facility, the ABL facility contains no leverage or interest coverage ratios but does contain a financial covenant whereby the Company must maintain a fixed charge coverage ratio, measured over the prior four fiscal quarters, of not less than 1.00:1.00 after an event of default has occurred or if the undrawn availability under ABL facility is less than the greater of (i) 10% of the then applicable maximum borrowing amount or (ii) $40.0 million. The Company does not meet this required fixed charge coverage ratio at December 31, 2015. As a result, the Company is not able to access this remaining 10% or $40.0 million of the ABL facility until it meets the required ratio. Additionally, the Company must demonstrate liquidity, as calculated in accordance with the terms of the agreement, of at least $500 million on the date that is 91 days prior to June 1, 2019, the maturity date of the 9.375% Senior Notes due 2019, and such liquidity is available until the notes are paid in full or refinanced. There was no impact on the Company’s outstanding debt as a result of the ABL facility. There were no outstanding borrowings made under the ABL facility as of December 31, 2015, although approximately $4.6 million has been utilized to support the issuance of letters of credit. Average borrowings under the ABL and the Prior Credit Facility for the fiscal year ended December 31, 2015 were $61.0 million, bearing an average annual interest rate of 2.0%.

Convertible Notes

In June 2009, ATI issued $402.5 million in aggregate principal amount of 4.25% Convertible Senior Notes due 2014 (the “Convertible Notes”). Interest was payable semi-annually on June 1 and December 1 of each year. The Convertible Notes were unsecured and unsubordinated obligations of the Company and ranked equally with all of its existing and future senior unsecured debt.

On June 2, 2014, the Company repaid the remaining $397.5 million outstanding of the Convertible Notes. Holders of the Convertible Notes had the option to convert their notes into shares of ATI common stock at any time prior to the close of business on the second scheduled trading day immediately preceding the June 1, 2014 maturity date. Prior to the maturity date, $5.0 million of the Convertible Notes were converted into 120,476 shares of ATI common stock. The conversion rate for the Convertible Notes was 23.9263 shares of ATI common stock per $1,000 principal amount of Convertible Notes, equivalent to a conversion price of approximately $41.795 per share. Other than receiving cash in lieu of fractional shares, holders did not have the option to receive cash instead of shares of common stock upon conversion.

Ladish Notes

In conjunction with the acquisition of Ladish Co., Inc. (“Ladish”, now ATI Ladish LLC) in May 2011, the Company assumed the Series B and Series C Notes previously issued by Ladish. During 2015, the Company prepaid $5.7 million in aggregate principal amount of its 6.14% ATI Ladish Series B senior notes due May 16, 2016, representing all of the remaining outstanding Series B Notes. Also during 2015, the Company repaid the $10.0 million aggregate principal amount of its outstanding 6.41% ATI Ladish Series C senior notes, due September 2, 2015.

Foreign and Other Credit Facilities

The Company has an additional separate credit facility for the issuance of letters of credit. As of December 31, 2015, $32 million in letters of credit were outstanding under this facility.

STAL, the Company’s Chinese joint venture company in which ATI has a 60% interest, has a separate $20 million revolving credit facility entered into in April 2015. Borrowings under the STAL revolving credit facility are in U.S. dollars based on U.S. interbank offered rates. The credit facility is supported solely by STAL’s financial capability without any guarantees from the joint venture partners. The credit facility requires STAL to maintain a minimum level of shareholders’ equity, and certain financial ratios.

The Company has no off-balance sheet financing relationships as defined in Item 303(a)(4) of SEC Regulation S-K, with variable interest entities, structured finance entities, or any other unconsolidated entities. At December 31, 2015, the Company had not guaranteed any third-party indebtedness.