Short-Term and Long-Term Debt

3 Months Ended

Mar. 31, 2017

Short-Term and Long-Term Debt [Text Block]

SHORT-TERM AND LONG-TERM DEBT

The following tables present ALLETE’s short-term and long-term debt as of March 31, 2017 and December 31, 2016:



March 31, 2017	Principal		Unamortized Debt Issuance Costs	Total
Millions
Short-Term Debt (a)		$164.5	$(0.6)		$163.9
Long-Term Debt	1,380.2		(10.0)	1,370.2
Total Debt		$1,544.7	$(10.6)		$1,534.1


(a)	Consists of long-term debt due within one year and notes payable.



December 31, 2016	Principal		Unamortized Debt Issuance Costs	Total
Millions
Short-Term Debt (a)		$188.3	$(0.6)		$187.7
Long-Term Debt	1,380.8		(10.4)	1,370.4
Total Debt		$1,569.1	$(11.0)		$1,558.1


(a)	Consisted of long-term debt due within one year.

No long-term debt was issued in the first three months of 2017.

In December 2016, ALLETE entered into an agreement to sell $80 million of the Company's senior unsecured notes (the Notes) to certain institutional buyers in the private placement market. The Notes will be sold in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended, to institutional accredited investors. The Notes will be issued on or about June 1, 2017, carry an interest rate of 3.11 percent and mature on June 1, 2027.

Interest on the Notes is payable semi-annually on June 1 and December 1 of each year, commencing on December 1, 2017. The Company has the option to prepay all or a portion of the Notes at its discretion, subject to a make-whole provision. The Notes are subject to additional terms and conditions which are customary for these types of transactions. Proceeds from the sale of the Notes will be used to redeem debt, fund corporate growth opportunities and/or for general corporate purposes.

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 financial 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 March 31, 2017, our ratio was approximately 0.43 to 1.00. Failure to meet this covenant would give rise to an event of default if not cured after notice from the 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 March 31, 2017, ALLETE was in compliance with its financial covenants.