Note 3. Long-Term Debt

The company’s borrowings consisted of the following at December 31 (in thousands):


	2016		2015
5.125% senior notes due 2021	$	700,000	$	700,000
6 3/₈% senior notes due 2022		350,000		350,000
5 1/₄% senior notes due 2023		400,000		400,000
5.500% senior notes due 2024		500,000		500,000
5.000% senior notes due 2026		400,000		-
6 1/₈% senior notes due 2019		-		400,000
Senior term loan		-		237,500
Other obligations		36,791		40,634
Total debt		2,386,791		2,628,134
Less debt issuance costs		29,965		33,478
Total amounts outstanding		2,356,826		2,594,656
Less current maturities		3,632		16,680
Long-term debt	$	2,353,194	$	2,577,976

Financing Activity

In December 2016, the company issued $400.0 million of 5.000% senior notes due 2026 (the "2026 Notes"), the proceeds of which, along with available cash, were used to fund the December 2016 tender offer to purchase at a redemption price of 103.388% a total of $266.3 million principal amount, plus accrued and unpaid interest to, but not including, the date of repurchase, of the company's 6.125% senior notes due 2019 (the "2019 Notes"), and the December 2016 call and repayment at a redemption price of 103.063% of the $133.7 million remaining outstanding principal amount of the 2016 Notes plus accrued and unpaid interest to, but not including, the date of repayment. In addition, the company repaid the remaining $228.1 million of outstanding senior secured term loan debt with available cash in December 2016, which was set to mature in November 2019. The company recorded expenses related to tender and call premiums, write off of unamortized debt issuance costs, and other expenses of $16.5 million, which are reflected in other expenses in the consolidated statement of operations for the year ended December 31, 2016.

On March 16, 2015, the company called and repaid all $350.0 million of its outstanding 7 5/₈% Senior Notes due 2020 (the “2020 Notes”) at a redemption price of 103.813% of the principal amount of the 2020 Notes, plus accrued and unpaid interest to, but not including, the date of redemption. Associated premiums and the write off of deferred financing costs of approximately $16.7 million were recorded in other expense in conjunction with the redemption.

In September 2014, the company issued $700.0 million of 5.125% Senior Notes due 2021 (the “2021 Senior Notes”) and $500.0 million of 5.500% Senior Notes due 2024 (the “2024 Senior Notes”), combined the “Senior Notes”. The proceeds from the issuance of the Senior Notes, along with cash on hand and borrowings under the company’s then existing senior secured credit facility, were used to fund the September 16, 2014 acquisition of the Columbus Flat Roll Division.

In June 2014, holders of $271.8 million principal amount of the company’s 5.125% Convertible Senior Notes due June 15, 2014 (the “Convertible Notes”), exercised their option to convert the Convertible Notes into shares of common stock by the close of business on June 12, 2014, the conversion election deadline. The conversion rate provided under the terms of the Convertible Notes was 58.4731 shares of common stock per $1,000 principal amount of Convertible Notes, equivalent to a conversion price of approximately $17.10 per share of common stock, resulting in the company issuing a total of 15,893,457 shares of common stock from treasury shares upon conversion of the Convertible Notes. The remaining $15.7 million of the outstanding Convertible Notes was paid in cash on June 16, 2014.

Note 3. Long-Term Debt (Continued)

Senior Secured Credit Facility, due 2019

The company’s November 2014 senior secured credit facility (“Facility”), which provides a $1.2 billion Revolver, matures November 2019. Subject to certain conditions, the company has the opportunity to increase the Revolver size by at least $750.0 million. The Facility is guaranteed by certain of the company’s subsidiaries; and is secured by substantially all of the company’s and its wholly-owned subsidiaries’ receivables and inventories, and by pledges of all shares of the company’s wholly-owned subsidiaries’ capital stock or other equity interests, and intercompany debt held by the company as collateral. The Revolver is available to fund working capital, capital expenditures, and other general corporate purposes.

The Facility pricing grid is adjusted quarterly, and is based on the company’s leverage of net debt (as defined in the Facility) to last-twelve-months (LTM) consolidated adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, and certain other non-cash transactions as allowed in the Facility). The minimum pricing is LIBOR plus 1.00% or Prime, and the maximum pricing is LIBOR plus 2.00% or Prime plus 1.00%. In addition, the company is subject to an unused commitment fee of between 0.225% and 0.375% (based on leverage of net debt to LTM EBITDA) which is applied to the unused portion of the Revolver each quarter.

The Facility contains financial covenants and other covenants pertaining to the company’s ability (which may under certain circumstances be limited) to make capital expenditures; incur indebtedness; permit liens on property; enter into transactions with affiliates; make restricted payments or investments; enter into mergers, acquisitions or consolidations; conduct asset sales; pay dividends or distributions, or enter into other specified transactions and activities. The company’s ability to borrow funds within the terms of the Revolver is dependent upon its continued compliance with the financial and other covenants. At December 31, 2016, the company had $1.2 billion of availability on the Revolver, $12.4 million of outstanding letters of credit and other obligations which reduce availability, and there were no borrowings outstanding.

The financial covenants under the company’s Facility state that it must maintain an interest coverage ratio of not less than 2.50:1.00. The company’s interest coverage ratio is calculated by dividing its LTM consolidated adjusted EBITDA by its LTM gross interest expense less amortization of financing fees. In addition, a net debt (as defined in the Facility) to LTM consolidated adjusted EBITDA (net debt leverage ratio) of not more than 5.00:1.00 must be maintained. If the net debt leverage ratio exceeds 3.50:1:00 at any time, the company’s ability to make certain payments as defined in the Facility (which includes cash dividends to stockholders and share purchases, among other things), is limited. At December 31, 2016, the company’s interest coverage ratio and net debt leverage ratio were 8.32:1.00 and 1.58:1.00, respectively. The company was therefore in compliance with these covenants at December 31, 2016, and anticipates remaining in compliance during the next twelve months.

Note 3. Long-Term Debt (Continued)

Senior Unsecured Notes

We have five different tranches of senior unsecured notes (Notes) outstanding. These Notes are in equal right of payment with all existing and future senior unsecured indebtedness and are senior in right of payment to all subordinated indebtedness. These Notes contain provisions that allow the company to redeem the senior notes on or after the dates and at redemption prices (expressed as a percentage of principal amount) listed below. Additionally, these Notes generally allow the company to redeem some or all of the Notes by paying a “make-whole” premium any time prior to the dates listed below. The company may redeem up to 35% of each of the Notes at a redemption price and by the dates listed below using the proceeds from the sales of the company’s common stock. See the key terms of each of the Notes outstanding below.



Issue	2021 Notes	2022 Notes	2023 Notes	2024 Notes	2026 Notes
Outstanding Balance	$700.0 million	$350.0 million	$400.0 million	$500.0 million	$400.0 million
Stated Interest Rate	5.125%	6 3/₈%	5 1/₄%	5.500%	5.000%
Semi-Annual Interest Payment Dates	April 1 and	February 15 and	April 15 and	April 1 and	June 15 and
	October 1	August 15	October 15	October 1	December 15
Equity Redemption Option Price & Date	105.125%	N/A – date	N/A – date	105.500%	105.000%
	October 1, 2017	passed	passed	October 1, 2017	December 15, 2019

“Make-whole” Option Date	October 1, 2017	August 15, 2017	April 15, 2018	October 1, 2019	December 15, 2021
First Call Price & Date	102.563%	103.188%	102.625%	102.750%	102.500%
	October 1, 2017	August 15, 2017	April 15, 2018	October 1, 2019	December 15, 2021

Second Call Price & Date	101.281%	102.125%	101.750%	101.833%	101.667%
	October 1, 2018	August 15, 2018	April 15, 2019	October 1, 2020	December 15, 2022

Third Call Price & Date	100.000%	101.063%	100.875%	100.917%	100.833%
	October 1, 2019	August 15, 2019	April 15, 2020	October 1, 2021	December 15, 2023

Fourth Call Price & Date	-	100.000%	100.000%	100.000%	100.000%
		August 15, 2020	April 15, 2021	October 1, 2022	December 15, 2024

Maturity Date	October 1, 2021	August 15, 2022	April 15, 2023	October 1, 2024	December 15, 2026

Other Obligations

Minnesota Economic Development State Secured Loans. Mesabi Nugget has loans from various Minnesota state agencies related to the construction and ultimate operation of Mesabi Nugget. These loans require monthly principal and interest payments, at a 3.5% interest rate until February 2017, and then changing to 5.0% through maturity in 2027. Amounts due under these loans were $22.3 million and $24.0 million at December 31, 2016, and 2015, respectively.

Other Secured Loans. One of the company’s controlled subsidiaries entered into financing agreements for certain equipment which bear interest at 6.0%, with monthly principal and interest payments required through maturities in 2027 and 2028. The outstanding principal balance of these agreements was $9.5 million and $10.1 million at December 31, 2016, and 2015, respectively.

One of the company’s controlled subsidiaries has a secured credit agreement in 2015 which provides a revolving variable rate credit facility of up to $40.0 million, subject to a borrowing base determined from eligible accounts receivable and inventory, and other cash flow restrictions. Interest is payable monthly. There were no amounts outstanding under this credit facility as of December 31, 2016.

Unsecured Loans. The company has an unsecured electricity transmission facility loan which bears interest at 8.1%, with monthly principal and interest payments required through maturity in 2022. The company has an unused $3.0 million stand-by letter of credit in conjunction with this loan. The outstanding principal balance was $4.2 million and $4.9 million as of December 31, 2016, and 2015, respectively.

Note 3. Long-Term Debt (Continued)

Outstanding Debt Maturities

Maturities of outstanding debt as of December 31, 2016, are as follows (in thousands):


2017	$	3,632
2018		3,102
2019		3,292
2020		3,491
2021		703,708
Thereafter		1,669,566
	$	2,386,791

The company capitalizes interest on all qualifying construction in progress assets. For the years ended December 31, 2016, 2015, and 2014, total interest costs incurred were $148.5 million, $154.4 million, and $139.7 million, respectively, of which $2.5 million, $457,000 and $2.5 million, respectively, were capitalized.