Debt

Debt at December 31, 2014 and 2013 was as follows:



(In millions)	2014		2013
Allegheny Technologies $500 million 5.875% Senior Notes due 2023 (a)	$	500.0	$	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
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 (b)	11.9		18.2
Ladish Series C 6.41% Notes due 2015 (c)	10.3		21.1
Domestic Bank Group $400 million unsecured credit agreement	—		—
Foreign credit agreements	—		—
Industrial revenue bonds, due through 2020, and other	4.7		5.5
Total short-term and long-term debt	1,526.9		1,947.3
Short-term debt and current portion of long-term debt	17.8		419.9
Total long-term debt	$	1,509.1	$	1,527.4


(a)	Bearing interest at 6.125% effective August 15, 2014.


(b)	Includes fair value adjustments of $0.4 million and $1.0 million at December 31, 2014 and December 31, 2013, respectively.


(c)	Includes fair value adjustments of $0.3 million and $1.1 million at December 31, 2014 and December 31, 2013, respectively.

Interest expense was $109.8 million in 2014, $66.0 million in 2013, and $72.4 million in 2012. Interest expense was reduced by $5.3 million, $45.7 million, and $24.5 million, in 2014, 2013, and 2012, respectively, from interest capitalization on capital projects. Interest and commitment fees paid were $113.2 million in 2014, $110.6 million in 2013, and $96.5 million in 2012. Net interest expense includes interest income of $1.1 million in 2014, $0.8 million in 2013, and $0.8 million in 2012.

Scheduled principal payments during the next five years are $17.8 million in 2015, $7.7 million in 2016, $0.5 million in 2017, $0.2 million in 2018, and $350.1 million in 2019.

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, and the 2023 Notes 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 in 2013, and are being amortized to interest expense over 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. During the fourth quarter of 2014, Moody’s downgraded the Company’s credit rating one notch to Ba1 from Baa3, resulting in an increase of the interest rate on the 2023 Notes from 5.875% to 6.125% effective with the interest period beginning August 15, 2014. Future downgrades of the Company’s credit ratings could result in additional increases 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 (“credit facility”) which expires May 31, 2018. 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.

In October 2014, the Company amended the credit facility to modify the maximum leverage ratio and minimum interest coverage ratio permitted under the credit facility and to revise the calculation definitions for these two ratios. In addition, the amended credit facility provides for a springing lien on certain of the Company’s accounts receivable and inventory. This springing lien would become effective in the future if the Company’s credit ratings from both Standard & Poor’s and Moody’s are below investment grade, and would be subsequently released if the Company’s credit rating returns to investment grade from either rating agency, assuming no event of default condition existed. Third-party costs associated with this amendment were $1.2 million in 2014, and are being amortized to interest expense over the remaining term of the credit facility.

As amended, the credit facility requires the Company to maintain a leverage ratio (measured as consolidated total indebtedness net of cash on hand in excess of $50 million, divided by consolidated EBITDA, defined as earnings before interest, taxes, depreciation and amortization, and non-cash pension expense, with the definition of consolidated EBIT excluding any gain or loss attributable to sale or other dispositions of assets outside the ordinary course of business, for the four prior fiscal quarters) of not greater than 5.75 for the quarter ended December 31, 2014, 5.00 for the quarter ended March 31, 2015, 4.50 for the quarter ended June 30, 2015, 3.75 for the quarter ended September 30, 2015, and 3.50 for the quarter ended December 31, 2015 and for each fiscal quarter thereafter. The credit facility, as amended, also requires the Company to maintain an interest coverage ratio (consolidated EBITDA as calculated for the leverage ratio, divided by interest expense) of not less than 2.0 for the quarter ended December 31, 2014, 2.50 for the quarter ended March 31, 2015, 3.00 for the quarter ended June 30, 2015, 3.25 for the quarter ended September 30, 2015, and 3.50 for the quarter ended December 31, 2015 and for each fiscal quarter thereafter. At December 31, 2014, the leverage ratio was 4.20 and the interest coverage ratio was 2.79. The Company was in compliance with these required ratios during all applicable periods. As of December 31, 2014, there were no outstanding borrowings made against the facility, although a portion of the facility was used to support approximately $4.7 million in letters of credit. The credit facility includes a $200 million sublimit for the issuance of letters of credit.

Borrowings under the credit 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 credit facility agreement; or (2) a base rate announced from time-to-time by the lending group (i.e., the Prime lending rate plus a margin ranging from 0.25% to 1.50% depending on the value of the leverage ratio). In addition, the credit facility contains a letter of credit fee of 1.25% to 2.50% and a facility fee of 0.18% to 0.35%, both depending upon the value of the leverage ratio. The Company’s overall borrowing costs under the credit 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 was payable semi-annually on June 1 and December 1 of each year. The Convertible Notes were unsecured and unsubordinated obligations of the Company and ranked equally with all of its existing and future senior unsecured debt.

On June 2, 2014, the Company repaid the remaining $397.5 million outstanding of the Convertible Notes. Holders of the Convertible Notes had 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 June 1, 2014 maturity date. Prior to the maturity date, $5.0 million of the Convertible Notes were converted into 120,476 shares of ATI common stock. The conversion rate for the Convertible Notes was 23.9263 shares of ATI common stock per $1,000 principal amount of Convertible Notes, equivalent to a conversion price of approximately $41.795 per share. Other than receiving cash in lieu of fractional shares, holders did not have the option to receive cash instead of shares of common stock upon conversion.

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 $11.5 million at December 31, 2014, 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 $10.0 million at December 31, 2014, 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, 2014. 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, 2014, $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, had a 205 million renminbi revolving credit facility with a group of banks that expired in August 2014. Replacement of the credit facility is expected to be finalized in the first quarter of 2015.

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, 2014, the Company had not guaranteed any third-party indebtedness.