Long-term Debt and Other Financing

Debt balances at June 30, 2016, and December 31, 2015, are presented below:



	June 30, 2016			December 31, 2015
Credit Facility	$	150.0		$	550.0
7.50% Senior Secured Notes due July 2023 (effective rate of 8.3%)	380.0			—
8.75% Senior Secured Notes due December 2018 (retired in July 2016)	128.3			380.0
5.00% Exchangeable Senior Notes due November 2019 (effective rate of 10.8%)	150.0			150.0
7.625% Senior Notes due May 2020	529.8			529.8
7.625% Senior Notes due October 2021	406.2			406.2
8.375% Senior Notes due April 2022	279.8			290.2
Industrial Revenue Bonds due 2020 through 2028	99.3			99.3
Capital lease for Research and Innovation Center	15.4			—
Unamortized debt discount/premium and debt issuance costs	(60.7		)	(51.4		)
Total long-term debt	$	2,078.1		$	2,354.1

During the six months ended June 30, 2016, we were in compliance with all the terms and conditions of our debt agreements.

Senior Secured Notes

In June 2016, as part of a transaction to refinance all of our 8.75% Senior Secured Notes due 2018 (the “Old Notes”), we issued $380.0 aggregate principal amount of 7.50% Senior Secured Notes due July 2023 (the “Refi Notes”) and generated net proceeds of $373.4 after underwriting discount. The Refi Notes are fully and unconditionally guaranteed by AK Holding, AK Steel’s direct parent, and by AK Tube LLC, AK Steel Properties, Inc. and Mountain State Carbon LLC (together with AK Tube LLC and AK Steel Properties, Inc., the Subsidiary Guarantors), three wholly-owned subsidiaries of AK Steel. The Refi Notes will be secured by first priority liens on the plant, property and equipment (other than certain excluded property, and subject to permitted liens) of AK Steel and the Subsidiary Guarantors and any proceeds of the foregoing. We used a portion of the net proceeds to pay the cash tender offer of our Old Notes. The indenture governing the Refi Notes includes covenants with customary restrictions on (a) the incurrence of additional debt by certain subsidiaries, (b) the incurrence of certain liens, (c) the incurrence of sale/leaseback transactions, (d) the use of proceeds from the sale of collateral, and (e) our ability to merge or consolidate with other entities or to sell, lease or transfer all or substantially all of our assets to another entity. The Refi Notes also contain customary events of default. Prior to July 15, 2019, AK Steel may redeem the Refi Notes at a price equal to par plus a make-whole premium and all accrued and unpaid interest to the date of redemption. Subsequent to that date, they are redeemable at 103.750% until July 15, 2020, 101.875% thereafter until July 15, 2021 and 100.000% thereafter, together with all accrued and unpaid interest to the date of redemption.

The issuance of the Refi Notes was part of a transaction to refinance the Old Notes and to replace them with the Refi Notes. In conjunction with the issuance of the Refi Notes, we repurchased $251.7 of Old Notes through a cash tender offer (the “Tender Offer”) at a tender price equal to 104.750% of principal plus accrued and unpaid interest. Simultaneous with the completion of the Refi Notes offering and the Tender Offer in June 2016, we announced in a notice of redemption that we would redeem all of the Old Notes that remained outstanding following the Tender Offer on July 20, 2016 at a redemption price of 104.375% plus accrued and unpaid interest. The remaining proceeds received from the issuance of the Refi Notes, together with cash on hand and borrowings under our Credit Facility, were deposited with the trustee of the Old Notes to be used to redeem the remaining outstanding Old Notes and were classified as a long-term asset as of June 30, 2016. The remaining outstanding Old Notes were redeemed on July 20, 2016 in accordance with the notice of redemption. In the second quarter of 2016, we recognized other expense of $5.6 for expenses related to the Tender Offer. We expect to record an additional expense of $6.8 in the third quarter of 2016 related to the call premium paid on the remaining Old Notes that were redeemed and the write-off of unamortized debt discount and issue costs related to the Old Notes. Fees of $14.8 paid to the holders of the Old Notes to tender their notes and expenses paid to third parties related to the issuance of the Refi Notes will be recognized as an adjustment of the carrying amount of the Refi Notes and recognized over their term as an adjustment to interest expense.

Senior Unsecured Notes

During the second quarter of 2016, we repurchased an aggregate principal amount of $10.4 of the 8.375% Senior Notes due 2022 in private, unsolicited, open market transactions. We completed these repurchases at a discount to the senior unsecured notes’ par value and recognized a net gain on the repurchases totaling $3.0 for the three and six months ended June 30, 2016, which is included in other income (expense).

Credit Facility

AK Steel has a $1,500.0 asset-backed revolving credit facility (the “Credit Facility”), which expires in March 2019 and is guaranteed by AK Steel’s parent company, AK Holding, and by three 100%-owned subsidiaries of AK Steel. The Credit Facility contains common restrictions, including limitations on, among other things, distributions and dividends, acquisitions and investments, indebtedness, liens and affiliate transactions. The Credit Facility requires that we maintain a minimum fixed charge coverage ratio of one to one if availability under the Credit Facility is less than $150.0. The Credit Facility’s current availability exceeds $150.0. Availability is calculated as the lesser of the Credit Facility commitment or our eligible collateral after advance rates, less in either case outstanding borrowings and letters of credit. The Credit Facility obligations are secured by our inventory and accounts receivable, and the Credit Facility’s availability fluctuates monthly based on the varying levels of eligible collateral. We do not expect any of these restrictions to affect or limit our ability to conduct business in the ordinary course. The Credit Facility includes a separate “first-in, last-out”, or “FILO” tranche, which allows us to use a portion of our eligible collateral at higher advance rates.

At June 30, 2016, our eligible collateral, after application of applicable advance rates, was $1,124.4. As of June 30, 2016, there were outstanding Credit Facility borrowings of $150.0. Availability as of June 30, 2016 was further reduced by $70.5 of outstanding letters of credit, resulting in remaining availability of $903.9.

Research and Innovation Center Lease

We are building a research and innovation center in Middletown, Ohio to replace our existing research facility. The facility is currently being constructed on a site located in the Cincinnati-Dayton growth corridor and we expect it to be substantially complete in the fourth quarter of 2016. We are financing the majority of the estimated $36.0 project through a long-term capital lease and government incentives. Because of our involvement in the project during the construction of the facility, we have included $15.4 of these costs that were incurred by the owner-lessor in property, plant and equipment and as long-term debt in the condensed consolidated balance sheets as of June 30, 2016.