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Debt | 9 Months Ended
--- | ---
Sep. 29, 2024
Debt Disclosure [Abstract] |
Debt | Debt Debt at September 29, 2024 and December 31, 2023 was as follows (in millions):
| September 29, 2024 |  | December 31, 2023
ATI Inc. 7.25% Notes due 2030 | $ | 425.0 |  |  | $ | 425.0 |
ATI Inc. 5.875% Notes due 2027 | 350.0 |  |  | 350.0 |
ATI Inc. 5.125% Notes due 2031 | 350.0 |  |  | 350.0 |
ATI Inc. 4.875% Notes due 2029 | 325.0 |  |  | 325.0 |
ATI Inc. 3.5% Convertible Senior Notes due 2025 | — |  |  | 291.4 |
Allegheny Ludlum 6.95% Debentures due 2025 (a) | 150.0 |  |  | 150.0 |
ABL Term Loan | 200.0 |  |  | 200.0 |
U.S. revolving credit facility | — |  |  | — |
Foreign credit facilities | — |  |  | 5.0 |
Finance leases and other | 98.2 |  |  | 102.8 |
Debt issuance costs | (14.8) |  |  | (19.6) |
Debt | 1,883.4 |  |  | 2,179.6 |
Short-term debt and current portion of long-term debt | 27.9 |  |  | 31.9 |
Long-term debt | $ | 1,855.5 |  |  | $ | 2,147.7 |
(a) The payment obligations of these debentures issued by Allegheny Ludlum, LLC are fully and unconditionally guaranteed by ATI. Revolving Credit Facility The Company has an Asset Based Lending (ABL) Credit Facility, which is collateralized by the accounts receivable and inventory of the Company’s operations. The ABL facility also provides the Company with the option of including certain machinery and equipment as additional collateral for purposes of determining availability under the facility. The ABL facility, which matures in September 2027, includes a $600 million revolving credit facility, a letter of credit sub-facility of up to $200 million, a $200 million term loan (Term Loan), and a swing loan facility of up to $60 million. The Term Loan has an interest rate of 2.0% above the adjusted Secured Overnight Financing Rate (SOFR) and can be prepaid in increments of $25 million if certain minimum liquidity conditions are satisfied. In addition, the Company has the right to request an increase of up to $300 million in the maximum amount available under the revolving credit facility for the duration of the ABL. The Company previously maintained a $50 million floating-for-fixed interest rate swap which converted a portion of the Term Loan to a 4.21% fixed interest rate that matured in June 2024. The applicable interest rate for revolving credit borrowings under the ABL facility includes interest rate spreads based on available borrowing capacity that range between 1.25% and 1.75% for SOFR-based borrowings and between 0.25% and 0.75% for base rate borrowings. The ABL facility contains a financial covenant whereby the Company must maintain a fixed charge coverage ratio of not less than 1.00:1.00 after an event of default has occurred and is continuing or if the undrawn availability under the ABL revolving credit portion of the facility is less than the greater of (i) 10% of the then applicable maximum loan amount under the revolving credit portion of the ABL and the outstanding Term Loan balance, or (ii) $60.0 million. The Company was in compliance with the fixed charge coverage ratio as of September 29, 2024. Additionally, the Company must demonstrate minimum liquidity specified by the facility during the 90-day period immediately preceding the stated maturity date of its 6.95% Debentures due 2025 issued by the Company’s wholly owned subsidiary, Allegheny Ludlum LLC. The ABL also contains customary affirmative and negative covenants for credit facilities of this type, including limitations on the Company’s ability to incur additional indebtedness or liens or to enter into investments, mergers and acquisitions, dispositions of assets and transactions with affiliates, some of which are more restrictive, at any time during the term of the ABL when the Company’s fixed charge coverage ratio is less than 1.00:1.00 and its undrawn availability under the revolving portion of the ABL is less than the greater of (a) $120 million or (b) 20% of the sum of the maximum loan amount under the revolving credit portion of the ABL and the outstanding Term Loan balance. As of September 29, 2024, there were no outstanding borrowings under the revolving portion of the ABL facility, and $31.7 million was utilized to support the issuance of letters of credit. There were no revolving credit borrowings under the ABL facility during the year-to-date period ended September 29, 2024. There were average revolving credit borrowings of $17 million bearing an average annual interest rate of 6.5% under the ABL facility for the year-to-date period ended October 1, 2023. The Company also has foreign credit facilities, primarily in China, that total $59 million based on September 29, 2024 foreign exchange rates, none of which was drawn as of September 29, 2024 and $5.0 million of which was drawn as of December 31, 2023. 2025 Convertible Notes During the third quarter of 2024, the Company notified holders of the $291.4 million outstanding principal amount of its 3.5% Convertible Notes due 2025 (2025 Convertible Notes) that they would be redeemed prior to their maturity date. The holders of any outstanding 2025 Convertible Notes had the right to convert the principal amount of such notes into shares of ATI’s common stock prior to the redemption date. Any 2025 Convertible Notes not tendered for conversion prior to the redemption date were redeemed in cash at a redemption price equal to the principal amount, plus accrued and unpaid interest. As a result, $291.0 million principal amount of the outstanding notes was converted at a rate of 64.7178 shares of ATI common stock per $1,000 principal amount, equivalent to a conversion price of $15.45 per share or 18.8 million shares of ATI common stock. Due to the early redemption of the 2025 Convertible Notes, the conversion rate was a premium to the conversion rate of 64.5745 shares of ATI common stock per $1,000 principal amount, or approximately $15.49 per share, that would have been due at maturity. The remaining $0.4 million of outstanding principal balance were not tendered for conversion and, as a result, the Company redeemed those for cash. For those holders who exercised the conversion rights, the terms of the 2025 Convertible Notes provided that any accrued but unpaid interest at the date of conversion was forfeited. As a result, accrued interest from the last interest payment date of June 15, 2024 through the date of conversion, totaling $2.3 million, was credited to additional paid-in capital. In addition, the remaining unamortized deferred issuance costs of $1.6 million at the date of conversion were charged to additional paid-in capital. Coincident with its redemption of the 2025 Convertible Notes, the Company also settled the capped call transactions initiated as part of the issuance of the 2025 Convertible Notes. The capped call transactions included a cap price of $19.76 per share and were settled for $76.1 million in cash, which is recorded as additional paid-in capital on the consolidated balance sheet and as a financing activity on the consolidated statement of cash flows. As of December 31, 2023, the fair value of the 2025 Convertible Notes was $864 million based on the quoted market price, which is classified in Level 1 of the fair value hierarchy. The 2025 Convertible Notes had a 3.5% cash coupon rate that was payable semi-annually in arrears on each June 15 and December 15. Including amortization of deferred issuance costs, the effective interest rate was 4.2% for the quarters and year-to-date periods ended September 29, 2024 and October 1, 2023. Remaining deferred issuance costs were $2.9 million at December 31, 2023. Interest expense on the 2025 Convertible Notes was as follows:
| Quarter ended |  | Year-to-date period ended
(in millions) | September 29, 2024 | October 1, 2023 |  | September 29, 2024 | October 1, 2023
Contractual coupon rate | $ | 2.1 |  | $ | 2.5 |  |  | $ | 7.2 |  | $ | 7.6 |
Amortization of debt issuance costs | 0.3 |  | 0.5 |  |  | 1.3 |  | 1.4 |
Total interest expense | $ | 2.4 |  | $ | 3.0 |  |  | $ | 8.5 |  | $ | 9.0 |

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147481544/470-10-50-6 Reference 2: 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