Debt

Debt at December 31, 2013 and 2012 was as follows:



(In millions)	2013		2012
Allegheny Technologies $500 million 5.875% Senior Notes due 2023	$	500.0	$	—
Allegheny Technologies $500 million 5.95% Senior Notes due 2021	500.0		500.0
Allegheny Technologies $402.5 million 4.25% Convertible Senior Notes due 2014	402.5		402.5
Allegheny Technologies $350 million 9.375% Senior Notes due 2019	350.0		350.0
Allegheny Ludlum 6.95% Debentures due 2025	150.0		150.0
Ladish Series B 6.14% Notes due 2016 (a)	18.2		24.8
Ladish Series C 6.41% Notes due 2015 (b)	21.1		32.5
Domestic Bank Group $400 million unsecured credit agreement	—		—
Foreign credit agreements	—		14.2
Industrial revenue bonds, due through 2020, and other	5.5		6.1
Total short-term and long-term debt	1,947.3		1,480.1
Short-term debt and current portion of long-term debt	419.9		17.1
Total long-term debt	$	1,527.4	$	1,463.0


(a)	Includes fair value adjustments of $1.0 million and $1.9 million at December 31, 2013 and December 31, 2012, respectively.


(b)	Includes fair value adjustments of $1.1 million and $2.5 million at December 31, 2013 and December 31, 2012, respectively.

Interest expense was $66.0 million in 2013, $72.4 million in 2012, and $93.7 million in 2011. Interest expense was reduced by $45.7 million, $24.5 million, and $12.1 million, in 2013, 2012, and 2011, respectively, from interest capitalization on capital projects. Interest and commitment fees paid were $110.6 million in 2013, $96.5 million in 2012, and $102.8 million in 2011. Net interest expense includes interest income of $0.8 million in 2013, $0.8 million in 2012, and $1.4 million in 2011.

Scheduled principal payments during the next five years are $419.9 million in 2014, $17.3 million in 2015, $7.4 million in 2016, $0.4 million in 2017, and $0.2 million in 2018.

2023 Notes

On July 12, 2013, ATI issued $500 million aggregate principal amount of 5.875% Senior Notes due 2023 (the “2023 Notes”). Interest on the 2023 Notes is payable semi-annually in arrears at a rate of 5.875% per year and will mature on August 15, 2023, unless redeemed or repurchased earlier. Underwriting fees, discount, and other third-party expenses for the issuance of the 2023 Notes were $5.2 million, and are being amortized to interest expense over the the 10-year term of the 2023 Notes. The 2023 Notes are unsecured and unsubordinated obligations of the Company and equally ranked with all of its existing and future senior unsecured debt. The interest rate payable on the 2023 Notes is subject to adjustment in the event of a change in the credit ratings on the 2023 Notes. A downgrade of the Company's credit ratings could result in an increase to the interest cost with respect to the 2023 Notes.

Unsecured Credit Agreement

The Company has a $400 million senior unsecured domestic revolving credit facility, which was amended in May and September 2013 to, among other things, extend the expiration date of the commitments of the lenders thereunder to May 31, 2018 and to modify the maximum leverage ratio and minimum interest coverage ratio permitted under the facility. Under the terms of the facility, the Company may increase the size of the credit facility by up to $100 million without seeking the further approval of the lending group. As amended, the facility required the Company to maintain a leverage ratio (consolidated total indebtedness divided by consolidated earnings before interest, taxes and depreciation and amortization for the four prior fiscal quarters) of 4.50 for the quarter ended September 30, 2013, which increased from the maximum requirement of 3.25 prior to the 2013 amendment. Under the amendment, the maximum leverage ratio is then reduced to 4.0 beginning with the quarter ended December 31, 2013, then to 3.75 for the quarter ended March 31, 2015 and is further reduced to 3.50 beginning with the quarter ended June 30, 2015 and for each fiscal quarter thereafter. As amended, the credit facility required that the Company maintain an interest coverage ratio (consolidated earnings before interest and taxes divided by interest expense) of not less than 1.75 for the quarter ended December 31, 2013, which decreased from the minimum requirement of 2.0 prior to the 2013 amendment. Under the amendment, the minimum interest coverage ratio is then increased to 2.0 for the quarter ended March 31, 2014 and for each fiscal quarter thereafter. At December 31, 2013, the leverage ratio was 1.50 and the interest coverage ratio was 7.43. The definition of consolidated earnings before interest and taxes, and consolidated earnings before interest, taxes, depreciation and amortization as used in the interest coverage and leverage ratios excludes any non-cash pension expense or income, and consolidated indebtedness in the leverage ratio is net of cash on hand in excess of $50 million. The Company was in compliance with these required ratios during all applicable periods. As of December 31, 2013, there were no outstanding borrowings made against the facility, although a portion of the facility was used to support approximately $5 million in letters of credit. The facility includes a $200 million sublimit for the issuance of letters of credit.

Borrowings or letter of credit issuance under the unsecured facility bear interest at the Company’s option at either: (1) the one-, two-, three- or six-month LIBOR rate plus a margin ranging from 1.25% to 2.50% depending upon the value of the leverage ratio as defined by the unsecured facility agreement; or (2) a base rate announced from time-to-time by the lending group (i.e., the Prime lending rate). In addition, the unsecured facility contains a facility fee of 0.18% to 0.35% depending upon the value of the leverage ratio. The Company’s overall borrowing costs under the unsecured facility are not affected by changes in the Company’s credit ratings.

Convertible Notes

In June 2009, ATI issued $402.5 million in aggregate principal amount of 4.25% Convertible Senior Notes due 2014 (the “Convertible Notes”). Interest is payable semi-annually on June 1 and December 1 of each year. The Convertible Notes are unsecured and unsubordinated obligations of the Company and rank equally with all of its existing and future senior unsecured debt.

The Company does not have the right to redeem the Convertible Notes prior to the stated maturity date. Holders of the Convertible Notes have the option to convert their notes into shares of ATI common stock at any time prior to the close of business on the second scheduled trading day immediately preceding the stated maturity date (June 1, 2014). The initial conversion rate for the Convertible Notes is 23.9263 shares of ATI common stock per $1,000 (in whole dollars) principal amount of Convertible Notes (9,630,336 shares), equivalent to a conversion price of approximately $41.795 per share, subject to adjustment, as defined in the Convertible Notes. Other than receiving cash in lieu of fractional shares, holders do not have the option to receive cash instead of shares of common stock upon conversion. Accrued and unpaid interest that exists upon conversion of a Convertible Note will be deemed paid by the delivery of shares of ATI common stock and no cash payment or additional shares will be given to holders.

If the Company undergoes a fundamental change, as defined in the Convertible Notes, holders may require the Company to repurchase all or a portion of their Convertible Notes at a price equal to 100% of the principal amount of the notes to be purchased plus any accrued and unpaid interest up to, but excluding, the repurchase date. Such a repurchase will be made in cash.

Ladish Notes

In conjunction with the acquisition of Ladish Co., Inc. (“Ladish”, now ATI Ladish LLC) in May 2011, the Company assumed the Series B and Series C Notes previously issued by Ladish. The Series B 6.14% Notes are unsecured and have a principal balance of $17.2 million at December 31, 2013, excluding fair value adjustments. The Series B Notes pay interest semi-annually and mature on May 16, 2016, with the principal amortizing equally in annual payments over the remaining term. The Series C 6.41% Notes are unsecured and have a principal balance of $20.0 million at December 31, 2013, excluding fair value adjustments. The Series C Notes pay interest semi-annually and mature on September 2, 2015, with the principal amortizing equally in annual payments over the remaining term. The Series B and Series C Notes contain financial covenants specific to Ladish which (1) limit the incurrence of certain additional debt; (2) require a certain level of consolidated adjusted net worth; (3) require minimum fixed charges coverage ratio; and (4) require a limited amount of funded debt to consolidated cash flow. The covenant on incurrence of additional debt limits funded debt to 60% of total capitalization. Ladish was in compliance with all Series B and Series C covenants at December 31, 2013. In March 2012, the Ladish Series B and Series C Notes were amended to replace certain reporting requirements specific to these Notes with a Parent Guaranty Agreement by ATI, by which ATI unconditionally guarantees all amounts payable by ATI Ladish LLC for the Series B and Series C Notes. As a result of the March 2012 amendment, the Series B and Series C Notes are equally ranked with all of ATI’s existing and future senior unsecured debt.

Foreign and Other Credit Facilities

The Company has an additional separate credit facility for the issuance of letters of credit. As of December 31, 2013, $32 million in letters of credit were outstanding under this facility.

STAL, the Company’s Chinese joint venture company in which ATI has a 60% interest, has a revolving credit facility with a group of banks that expires in August 2014. Under the credit facility, STAL may borrow up to 205 million renminbi (approximately $34 million based on December 2013 exchange rates) at an interest rate equal to 90% of the applicable lending rate published by the People’s Bank of China. The credit facility is supported solely by STAL’s financial capability without any guarantees from the joint venture partners, and is intended to be utilized in the future to support the expansion of STAL’s operations, which are located in Shanghai, China. The credit facility requires STAL to maintain a minimum level of shareholders’ equity, and certain financial ratios. We were in compliance with these required ratios during all applicable periods. As of December 31, 2013, there were no borrowings made under the STAL credit facility.

The Company’s subsidiaries also maintain other credit agreements with various foreign banks, which provide for borrowings of up to approximately $30 million. At December 31, 2013, the Company had approximately $30 million of available borrowing capacity under these foreign credit agreements. These agreements provide for annual facility fees of up to 0.20%.

The Company has no off-balance sheet financing relationships as defined in Item 303(a)(4) of SEC Regulation S-K, with variable interest entities, structured finance entities, or any other unconsolidated entities. At December 31, 2013, the Company had not guaranteed any third-party indebtedness.