NOTE 4—DEBT AND REDEEMABLE PREFERRED STOCK

The following table presents the Company’s long-term debt as of June 30, 2016 and December 31, 2015:

	June 30,			December 31,
(In millions)	2016			2015
Senior Secured Notes:
Principal amount outstanding	$	305.0		$	305.0
Unamortized original issue discount and issuance costs		(12.3	)		(14.3	)
Senior Secured Notes, net		292.7			290.7
Asset-Based Facility:
Principal amount outstanding		24.0			22.0
Unamortized debt issuance costs		(1.9	)		(2.4	)
Asset-Based Facility, net		22.1			19.6
Capital leases		4.3			4.1
Current portion of long-term debt		(2.4	)		(2.3	)
Total long-term debt, net	$	316.7		$	312.1

Long-term debt

Senior Secured Notes

The Senior Secured Notes mature on January 15, 2019 and interest is payable on January 15 and July 15 of each year through the date of maturity. For the three months ended June 30, 2016 and 2015, interest expense associated with the Senior Secured Notes was $8.5 million and $8.7 million, respectively, including $1.0 million and $1.1 million of noncash expense related to the amortization of the original issue discount and debt issuance costs, respectively. For the six months ended June 30, 2016 and 2015, interest expense was $17.3 million and $16.7 million, respectively, including $2.0 million and $2.1 million, respectively, of amortization of debt discount and issuance costs. As of June 30, 2016, the borrowers were in compliance with all applicable covenants under the Indenture of the Senior Secured Notes.

Asset-Based Facility

For the three months ended June 30, 2016 and 2015, interest expense associated with the Asset-Based Facility was $0.6 million and $0.5 million, respectively, including $0.2 million and $0.2 million, respectively, related to the amortization of debt issuance costs. For the six months ended June 30, 2016 and 2015, interest expense was $1.0 million and $0.6 million, respectively, including $0.4 million and $0.2 million, respectively, related to the amortization of debt issuance costs. As of June 30, 2016, the borrowers were in compliance with all applicable covenants under the Asset-Based Facility.

Capital Leases

In the normal course of operations, Real Alloy enters into capital leases to finance office and other equipment for its operations. As of June 30, 2016, $2.4 million of the $4.3 million in capital lease obligations are due within the next twelve months.

Redeemable Preferred Stock

The Redeemable Preferred Stock was issued to Aleris on February 27, 2015 as a portion of the purchase price for the Real Alloy Acquisition and has a liquidation preference of $27.4 million, as of June 30, 2016. The Redeemable Preferred Stock pays quarterly dividends at a rate of 7% for the first eighteen months after the date of issuance, 8% for the next twelve months, and 9% thereafter. Dividends may be paid in-kind for the first two years, and thereafter will be paid in cash. All accrued and accumulated dividends on the Redeemable Preferred Stock will be prior and in preference to any dividend on any of the Company’s common stock or other junior securities.

The Company may generally redeem the shares of Redeemable Preferred Stock at any time at the liquidation preference, and the holders may require the Company to redeem their shares of Redeemable Preferred Stock at the liquidation preference upon a change of control as defined in the Indenture of the Senior Secured Notes (or any debt facility that replaces or redeems the Senior Secured Notes) to the extent that the change of control does not provide for such redemption at the liquidation preference. A holder of Redeemable Preferred Stock may require the Company to redeem all, but not less than all, of such holder’s Redeemable Preferred Stock sixty-six months after the issuance date. In addition, the Company shall redeem shares of Redeemable Preferred Stock to the extent Aleris is required to indemnify the Company under the Real Alloy Purchase Agreement for the Real Alloy Acquisition. The Redeemable Preferred Stock is not transferrable (other than to another subsidiary of Aleris) for eighteen months following issuance (or such longer period in connection with any ongoing indemnity claims under the Real Alloy Purchase Agreement).

The carrying value of Redeemable Preferred Stock is based on the estimated fair value of the instrument as of the issuance date plus dividends paid in-kind and accretion of the fair value adjustment to the Redeemable Preferred Stock. The difference between the liquidation preference and the estimated fair value as of the issuance date is being accreted over the period preceding the holder’s right to redeem the instrument, or sixty-six months.

The following table presents the activity related to the carrying value of Redeemable Preferred Stock during the six months ended June 30, 2016:

(In millions)
Balance, December 31, 2015	$	21.9
Dividends on Redeemable Preferred Stock, in-kind		0.9
Accretion of fair value adjustment to Redeemable Preferred Stock		0.5
Balance, June 30, 2016	$	23.3