Debt

12 Months Ended

Dec. 31, 2021

Debt Disclosure [Abstract]

Debt

M. Debt

Short-term borrowings.

December 31,	2021		2020
Short-term borrowings	$	75	$	77

Short-term borrowings are reported in Other current liabilities on the accompanying Consolidated Balance Sheet.

Long-Term Debt.

December 31,	2021			2020
6.75% Notes, due 2024	$	—		$	750
7.00% Notes, due 2026		—			500
5.500% Notes, due 2027		750			750
6.125% Notes, due 2028		500			500
4.125% Notes, due 2029		500			—
Other		5			6
Unamortized discounts and deferred financing costs		(28	)		(41	)
Total		1,727			2,465
Less: amount due within one year		1			2
Long-term debt, less amount due within one year	$	1,726		$	2,463

The principal amount of long-term debt maturing in each of the next five years is: $1 in each of 2022, 2023, 2024, and 2025, $0 in 2026.

144A Debt.

2029 Notes. In March 2021, Alcoa Nederland Holding B.V. (ANHBV), a wholly-owned subsidiary of Alcoa Corporation, completed a Rule 144A (U.S. Securities Act of 1933, as amended) debt issuance for $500 aggregate principal amount of 4.125% Senior Notes due 2029 (the 2029 Notes) with the following terms:

• Net proceeds were approximately $493, reflecting a discount to the initial purchasers as well as issuance costs. The discount, as well as costs to complete the financing, were deferred and are being amortized to interest expense over the term.

• Interest is paid semi-annually in March and September, which commenced September 30, 2021.

• Indenture contains customary affirmative and negative covenants, see below.

• Option to redeem on at least 10 days, but not more than 60 days, prior notice to the holders under multiple scenarios, including, in whole or in part, at any time, or from time to time after March 31, 2024, at a redemption price up to 102.063% of the principal amount, plus any accrued and unpaid interest.

• Subject to repurchase upon the occurrence of a change in control repurchase event (as defined in the indenture) at a repurchase price in cash equal to 101% of the aggregate principal amount of the notes repurchased, plus any accrued and unpaid interest.

The Company used the net proceeds of the 2029 Notes, together with cash on hand, to contribute $500 to its U.S. defined benefit pension plans applicable to salaried and hourly employees on April 1, 2021 (see Note O), to redeem in full $750 aggregate principal amount of the Company’s outstanding 6.75% Senior Notes due 2024 (the 2024 Notes) on April 7, 2021, and to pay transaction-related fees and expenses.

2027 Notes. In July 2020, ANHBV completed a Rule 144A debt issuance for $750 aggregate principal amount of 5.500% Senior Notes due 2027 (the 2027 Notes) with the following terms:

• Net proceeds were approximately $736, reflecting a discount to the initial purchasers as well as issuance costs. The discount, as well as costs to complete the financing, were deferred and are being amortized to interest expense over the term.

• Interest is paid semi-annually in June and December, which commenced on December 15, 2020.

• Indenture contains customary affirmative and negative covenants, see below.

• Option to redeem on at least 15 days, but not more than 60 days, prior notice to the holders under multiple scenarios, including, in whole or in part, at any time, or from time to time after June 15, 2023, at a redemption price up to 102.750% of the principal amount, plus any accrued and unpaid interest.

• Subject to repurchase upon the occurrence of a change in control repurchase event (as defined in the indenture) at a repurchase price in cash equal to 101% of the aggregate principal amount of the notes repurchased, plus any accrued and unpaid interest.

The Company used the net proceeds of the 2027 Notes for general corporate purposes, including adding cash to its balance sheet.

2028 Notes. In May 2018, ANHBV completed a Rule 144A debt issuance for $500 aggregate principal amount of 6.125% Senior Notes due 2028 (the 2028 Notes) with the following terms:

• Net proceeds were approximately $492, reflecting a discount to the initial purchasers as well as issuance costs. The discount, as well as costs to complete the financing, were deferred and are being amortized to interest expense over the term.

• Interest is paid semi-annually in November and May, which commenced November 15, 2018.

• Indenture contains customary affirmative and negative covenants, see below.

• Option to redeem on at least 30 days, but not more than 60 days, prior notice to the holders under multiple scenarios, including, in whole or in part, at any time, or from time to time after May 2023, at a redemption price up to 103.063% of the principal amount, plus any accrued and unpaid interest.

• Subject to repurchase upon the occurrence of a change in control repurchase event (as defined in the indenture) at a repurchase price in cash equal to 101% of the aggregate principal amount of the notes repurchased, plus any accrued and unpaid interest.

The Company used the net proceeds of the 2028 Notes, together with cash on hand, to make discretionary contributions to certain U.S. defined benefit pension plans.

The indentures of the 2027 Notes, 2028 Notes, and 2029 Notes contain customary affirmative and negative covenants, such as limitations on liens, limitations on sale and leaseback transactions, and a prohibition on a reduction in the ownership of AWAC entities below an agreed level. The negative covenants in the indentures are less extensive than those in the Facility (see below). For example, the indentures do not include a limitation on restricted payments, such as repurchases of common stock and shareholder dividends.

The 2027 Notes, the 2028 Notes, and the 2029 Notes are senior unsecured obligations of ANHBV and do not entitle the holders to any registration rights pursuant to a registration rights agreement. ANHBV does not intend to file a registration statement with respect to resales of or an exchange offer for the notes. The notes are guaranteed on a senior unsecured basis by Alcoa Corporation and its subsidiaries that are guarantors under the Facility (the “subsidiary guarantors” and, together with Alcoa Corporation, the “guarantors”). Each of the subsidiary guarantors will be released from their guarantees upon the occurrence of certain events, including the release of such guarantor from its obligations as a guarantor under the Facility.

The 2027 Notes, the 2028 Notes, and the 2029 Notes rank equally in right of payment with each other and with all of ANHBV’S existing and future senior unsecured indebtedness; rank senior in right of payment to any future subordinated obligations of ANHBV; and are effectively subordinated to ANHBV’s existing and future secured indebtedness, including under the Facility, to the extent of the value of property and assets securing such indebtedness. The guarantees of the notes rank equally in right of payment with each other and with all the guarantors’ existing and future senior unsecured indebtedness; rank senior in right of payment to any future subordinated obligations of the guarantors; and are effectively subordinated to the guarantors’ existing and future secured indebtedness, including under the Facility, to the extent of the value of property and assets securing such indebtedness.

Redemption events. On April 7, 2021, the Company redeemed in full $750 aggregate principal amount notes due in 2024 at a redemption price equal to 103.375% of the principal amount, plus accrued and unpaid interest. The issuance of the 2029 Notes and this redemption were determined to be an issuance of new debt and an extinguishment of existing debt. As a result, the Company recorded a loss of $32 on the extinguishment of debt in the second quarter of 2021 in Interest expense, which was comprised of the redemption premium and the write-off of deferred financing fees and unamortized debt issuance costs. The cash flows related to the transaction were classified as financing cash flows.

On September 30, 2021, the Company redeemed in full $500 aggregate principal amount notes due in 2026 at a redemption price equal to 103.5% of the principal amount, plus accrued and unpaid interest. As a result, the Company recorded a loss of $22 on the extinguishment of debt in the third quarter of 2021 in Interest expense, which was comprised of the redemption premium and the write-off of deferred financing fees and unamortized debt issuance costs. The cash flows related to the transaction were classified as financing cash flows.

Credit Facilities.

Alcoa Norway ANS

On October 2, 2019, Alcoa Norway ANS, a wholly-owned subsidiary of Alcoa Corporation, entered into a one-year, multicurrency revolving credit facility agreement for NOK 1.3 billion (approximately $149) which was fully and unconditionally guaranteed on an unsecured basis by Alcoa Corporation. The maturity date of the facility was subsequently extended by one year.

On April 8, 2020, Alcoa Norway ANS drew $100 against this facility. Repayment of the drawn amount, including interest accrued at 2.93%, occurred upon maturity on June 29, 2020.

In September 2021, Alcoa Norway ANS made the decision not to extend the maturity of the facility allowing it to expire, effective October 4, 2021. During 2021, no amounts were drawn related to this credit facility. In all periods, Alcoa Norway ANS was in compliance with related covenants.

Revolving Credit Facility

The Company has a senior secured $1,500 revolving credit and letter of credit facility in place for working capital and/or other general corporate purposes (the Facility). The Facility was established on September 16, 2016, was amended in each of 2017, 2018, 2019, 2020, and 2021, and is scheduled to mature on November 21, 2023. Subject to the terms and conditions under the Facility, the Company may borrow funds or issue letters of credit through its Alcoa Corporation or ANHBV legal entities. Borrowings can be executed in U.S. dollar, and letter of credit issuances are limited to $750. Effective January 1, 2022, the Company agreed to suspend borrowings denominated in euros due to reference rate reform and the phase-out of LIBOR. This suspension of borrowing denominated in euros will not materially impact the Company or its ability to access capital, if necessary.

The Facility is secured by, subject to certain exceptions, a first priority security interest in substantially all assets of Alcoa Corporation, ANHBV, the material domestic wholly-owned subsidiaries of Alcoa Corporation, and the material foreign wholly-owned subsidiaries of Alcoa Corporation located in Australia, Brazil, Canada, Luxembourg, the Netherlands, Norway, and Switzerland. This includes equity interests of certain subsidiaries that directly hold equity interests in AWAC entities. However, no AWAC entity is a guarantor of any obligation under the Facility and no asset of any AWAC entity, or equity interests in any AWAC entity, will be pledged to secure the obligations under the Facility. As provided in the Facility, each of the mentioned companies shall be released from all obligations under the first priority security interest upon (i) Alcoa Corporation attaining at least a Baa3 rating from either Moody’s Investor Service or BBB- rating from Standard and Poor’s Global Ratings, in each case with a stable outlook or better, (ii) ANHBV delivering the required written notice, and (iii) no default or event of default, as defined in the Facility, has occurred or is continuing.

The Facility includes several customary affirmative and negative covenants (applicable to Alcoa Corporation and certain subsidiaries described as restricted), that, subject to certain exceptions, include limitations on (among other things): indebtedness, liens, investments, sales of assets, restricted payments, entering into restrictive agreements, a covenant prohibiting reductions in the ownership of AWAC entities, and certain other specified restricted subsidiaries of Alcoa Corporation, below an agreed level. The Facility also contains customary events of default, including failure to make payments under the Facility, cross-default and cross-judgment default, and certain bankruptcy and insolvency events. In addition, the Facility contains two financial covenants, a leverage ratio and an interest expense coverage ratio, that impact availability of the $1,500 commitment and pricing.

As of December 31, 2021, the Company was in compliance with all covenants. The maximum additional borrowing capacity available to the Company to remain in compliance with the maximum leverage ratio covenant in the Facility was approximately $6,610. Therefore, the Company may access the entire amount of commitments under the Facility. There were no borrowings outstanding at December 31, 2021 and 2020, and no amounts were borrowed during 2021 and 2020 under the Facility.

On March 4, 2021, Alcoa Corporation and ANHBV, entered into an amendment (Amendment No. 4) to the Facility that provided additional flexibility to the Company by (i) increasing the maximum leverage ratio from 2.50 to 1.00 to 2.75 to 1.00, (ii) decreasing the minimum interest expense coverage ratio from 5.00 to 1.00 to 4.00 to 1.00, (iii) amending the definition of Total Indebtedness (as defined in the Facility) to permit the Company to exclude the principal amount of new senior notes issued during 2021 from indebtedness for purposes of the calculation of the leverage ratio in fiscal year 2021 (subject to adjustments based on pension obligations funded), and (iv) ending temporary restrictions on the Company’s ability to make certain restricted payments or incur incremental loans under the Facility. Amendment No. 4 also (i) provided additional debt capacity to permit the Company to issue up to $750 in aggregate principal amount of new senior notes prior to the end of fiscal year 2021 and (ii) provided a corresponding increase in the maximum leverage ratio commensurate with the increase in leverage resulting from the issuance of such notes up to the amount of pension obligations funded after the issuance of such notes but prior to December 31, 2021, which increase shall in any event not be in excess of the principal amount of such notes. Such additional increase in the maximum leverage ratio will be available beginning March 31, 2022.