Short-Term and Long-Term Debt

6 Months Ended

Jun. 30, 2011

Short-Term and Long-Term Debt (Details) [Abstract]

Short-Term and Long-Term Debt

NOTE 7.  SHORT-TERM AND LONG-TERM DEBT

Short-Term Debt. As of June 30, 2011, total short-term debt outstanding was $15.4 million ($14.4 million as of December 31, 2010) and consisted of long-term debt due within one year and notes payable.

On May 25, 2011, BNI Coal amended its Promissory Note and Supplement (Line of Credit) with CoBANK, ACB. The Line of Credit was increased from $3.0 million to $10.0 million and is being used for general corporate purposes. As of June 30, 2011, $2.5 million was drawn on the Line of Credit.

Long-Term Debt. As of June 30, 2011, total long-term debt outstanding was $770.7 million ($771.6 million as of December 31, 2010).

On May 25, 2011, we entered into a new $250 million Credit Agreement (Agreement) with JPMorgan Chase Bank, N.A., as Administrative Agent, and several other lenders that are parties thereto. The Agreement was effective July 1, 2011, and replaced our previous $150 million credit facility. The Agreement is unsecured and has a maturity date of June 30, 2015, which may be extended for one year. Such extension is subject to bank approvals. Advances from the Agreement may be used for general corporate purposes, to provide liquidity in support of ALLETE's commercial paper program and to issue up to $40 million in letters of credit.

Financial Covenants. Our long-term debt arrangements contain customary covenants. In addition, our lines of credit and letters of credit supporting certain long-term debt arrangements contain financial covenants. Our compliance with financial covenants is not dependent on debt ratings. The most restrictive covenant requires ALLETE to maintain a ratio of Indebtedness to Total Capitalization (as the amounts are calculated in accordance with the respective long-term debt arrangements) of less than or equal to 0.65 to 1.00 measured quarterly. As of June 30, 2011, our ratio was approximately 0.42 to 1.00. Failure to meet this covenant would give rise to an event of default if not cured after notice from a lender, in which event ALLETE may need to pursue alternative sources of funding. Some of ALLETE's debt arrangements contain "cross-default" provisions that would result in an event of default if there is a failure under other financing arrangements to meet payment terms or to observe other covenants that would result in an acceleration of payments due. As of June 30, 2011, ALLETE was in compliance with its financial covenants.