Debt

6 Months Ended

Jun. 30, 2024

Debt Disclosure [Abstract]

Debt

Debt

Debt at June 30, 2024 and December 31, 2023 was as follows (in millions): 

	June 30, 2024		December 31, 2023
ATI Inc. 7.25% Notes due 2030	$	425.0	$	425.0
ATI Inc. 5.875% Notes due 2027	350.0		350.0
ATI Inc. 5.125% Notes due 2031	350.0		350.0
ATI Inc. 4.875% Notes due 2029	325.0		325.0
ATI Inc. 3.5% Convertible Senior Notes due 2025	291.4		291.4
Allegheny Ludlum 6.95% Debentures due 2025 (a)	150.0		150.0
ABL Term Loan	200.0		200.0
U.S. revolving credit facility	—		—
Foreign credit facilities	—		5.0
Finance leases and other	96.8		102.8
Debt issuance costs	(17.4)		(19.6)
Debt	2,170.8		2,179.6
Short-term debt and current portion of long-term debt	316.8		31.9
Long-term debt	$	1,854.0	$	2,147.7

(a) The payment obligations of these debentures issued by Allegheny Ludlum, LLC are fully and unconditionally guaranteed by ATI.

Revolving Credit Facility

The Company has an Asset Based Lending (ABL) Credit Facility, which is collateralized by the accounts receivable and inventory of the Company’s operations. The ABL facility also provides the Company with the option of including certain machinery and equipment as additional collateral for purposes of determining availability under the facility. The ABL facility, which matures in September 2027, includes a $600 million revolving credit facility, a letter of credit sub-facility of up to $200 million, a $200 million term loan (Term Loan), and a swing loan facility of up to $60 million. The Term Loan has an interest rate of 2.0% above the adjusted Secured Overnight Financing Rate (SOFR) and can be prepaid in increments of $25 million if certain minimum liquidity conditions are satisfied. In addition, the Company has the right to request an increase of up to $300 million in the maximum amount available under the revolving credit facility for the duration of the ABL. The Company had a $50 million floating-for-fixed interest rate swap which converted a portion of the Term Loan to a 4.21% fixed interest rate. The swap matured in June 2024.

The applicable interest rate for revolving credit borrowings under the ABL facility includes interest rate spreads based on available borrowing capacity that range between 1.25% and 1.75% for SOFR-based borrowings and between 0.25% and 0.75% for base rate borrowings. The ABL facility contains a financial covenant whereby the Company must maintain a fixed charge coverage ratio of not less than 1.00:1.00 after an event of default has occurred and is continuing or if the undrawn availability under the ABL revolving credit portion of the facility is less than the greater of (i) 10% of the then applicable maximum loan amount under the revolving credit portion of the ABL and the outstanding Term Loan balance, or (ii) $60.0 million. The Company was in compliance with the fixed charge coverage ratio as of June 30, 2024. Additionally, the Company must demonstrate minimum liquidity specified by the facility during the 90-day period immediately preceding the stated maturity date of its 3.5% Convertible Senior Notes due 2025 and the 6.95% Debentures due 2025 issued by the Company’s wholly owned subsidiary, Allegheny Ludlum LLC. The ABL also contains customary affirmative and negative covenants for credit facilities of this type, including limitations on the Company’s ability to incur additional indebtedness or liens or to enter into investments, mergers and acquisitions, dispositions of assets and transactions with affiliates, some of which are more restrictive,

at any time during the term of the ABL when the Company’s fixed charge coverage ratio is less than 1.00:1.00 and its undrawn availability under the revolving portion of the ABL is less than the greater of (a) $120 million or (b) 20% of the sum of the maximum loan amount under the revolving credit portion of the ABL and the outstanding Term Loan balance.

As of June 30, 2024, there were no outstanding borrowings under the revolving portion of the ABL facility, and $31.7 million was utilized to support the issuance of letters of credit. There were no revolving credit borrowings under the ABL facility during the year-to-date period ended June 30, 2024. There were average revolving credit borrowings of $11 million bearing an average annual interest rate of 6.4% under the ABL facility for the year-to-date period ended July 2, 2023. The Company also has foreign credit facilities, primarily in China, that total $57 million based on June 30, 2024 foreign exchange rates, none of which was drawn as of June 30, 2024 and $5.0 million of which was drawn as of December 31, 2023.

2025 Convertible Notes

As of June 30, 2024, the Company has $291.4 million aggregate principal amount of 3.5% Convertible Notes due 2025 (2025 Convertible Notes) outstanding, which mature on June 15, 2025 and is included in short-term debt and current portion of long-term debt on the consolidated balance sheet as of June 30, 2024. As of June 30, 2024 and December 31, 2023, the fair value of the 2025 Convertible Notes was $1.04 billion and $864 million, respectively, based on the quoted market price, which is classified in Level 1 of the fair value hierarchy. The 2025 Convertible Notes have a 3.5% cash coupon rate that is payable semi-annually in arrears on each June 15 and December 15. Including amortization of deferred issuance costs, the effective interest rate is 4.2% for the quarters and year-to-date periods ended June 30, 2024 and July 2, 2023. Remaining deferred issuance costs were $2.0 million and $2.9 million at June 30, 2024 and December 31, 2023, respectively. Interest expense on the 2025 Convertible Notes was as follows:

	Quarter ended				Year-to-date period ended
(in millions)	June 30, 2024		July 2, 2023		June 30, 2024		July 2, 2023
Contractual coupon rate	$	2.6	$	2.6	$	5.1	$	5.1
Amortization of debt issuance costs	0.5		0.4		1.0		0.9
Total interest expense	$	3.1	$	3.0	$	6.1	$	6.0

Currently, and prior to the 41st scheduled trading day immediately preceding the maturity date, the Company may redeem all or any portion of the 2025 Convertible Notes, at its option, at a redemption price equal to 100% of the principal amount thereof, plus any accrued and unpaid interest, if the last reported sale price of ATI’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on the trading day immediately preceding the date on which ATI provides written notice of redemption.

The initial conversion rate for the 2025 Convertible Notes is 64.5745 shares of ATI common stock per $1,000 principal amount of the 2025 Convertible Notes, equivalent to an initial conversion price of approximately $15.49 per share (18.8 million shares). Prior to the close of business on the business day immediately preceding March 15, 2025, the 2025 Convertible Notes will be convertible at the option of the holders of 2025 Convertible Notes only upon the satisfaction of specified conditions and during certain periods. Thereafter, until the close of business on the second scheduled trading day immediately preceding the maturity date, the 2025 Convertible Notes will be convertible at the option of holders of 2025 Convertible Notes at any time regardless of these conditions. Conversions of the 2025 Convertible Notes may be settled in cash, shares of ATI’s common stock or a combination thereof, at ATI’s election.

ATI entered into privately negotiated capped call transactions with certain of the initial purchasers of the 2025 Convertible Notes or their respective affiliates (collectively, the Counterparties). The capped call transactions are expected generally to reduce potential dilution to ATI’s common stock upon any conversion of the 2025 Convertible Notes and/or offset any cash payments ATI is required to make in excess of the principal amount of converted 2025 Convertible Notes, as the case may be, with such reduction and/or offset subject to a cap based on the cap price. The capped call transactions initially included a cap price of $19.76 per share, and is subject to adjustments under the terms of the capped call transactions.