Management Report - Beursgorilla

ArcelorMittal Annual Report 200942 Consolidated Financial StatementsNotes to the Consolidated Financial Statements continuedArcelorMittal and Subsidiaries(millions of U.S. dollars, except share and per share data)The Senior Secured Notes are securedby a pledge of 423 of ArcelorMittalUSA’s First Mortgage Bonds and by asecond position lien on the inventoryof ArcelorMittal USA. As further creditenhancement, the Senior Secured Notesare fully and unconditionally guaranteedby ArcelorMittal USA, certain of itssubsidiaries, ArcelorMittal and certainother subsidiaries. The terms of the SeniorSecured Notes place certain limitationson the ability of ArcelorMittal USAand its subsidiaries to incur additionalindebtedness, pay dividends or make otherdistributions and various other activities.The indenture also contains covenantsthat are applicable to ArcelorMittal.These limitations are subject to a numberof exceptions and qualifications. The SeniorSecured Notes became investment graderated as of January 19, 2006. As a result,many of the above limitations were suspended,including restrictions on paying dividends ormaking other distributions to shareholders.Senior Unsecured NotesOn April 14, 2004, ArcelorMittal USAissued 600 of senior, unsecured debtsecurities due in 2014. The debt securitiesbear interest at a rate of 6.5% per annumand were issued at a discount of 5,which is amortized as interest expenseover the life of the senior unsecured notes.On July 22, 2005, ArcelorMittal USArepurchased 100 of unsecured notesleaving an outstanding balance of 500.These bonds are fully and unconditionallyguaranteed by certain wholly-ownedsubsidiaries of ArcelorMittal USA and,as of March 9, 2007, by ArcelorMittal.Other loansThe other loans relate mainly to loanscontracted by ArcelorMittal Inox Brasil SA,ArcelorMittal Brasil and Vega do Sul withdifferent counterparties.On April 24, 2008 ArcelorMittal Brasilentered into a BRL 600 million loanagreement due 2010 and bearinga floating interest rate.In 2008, the acquisition of IndustriasUnicon included the assumption of a 232principal amount of loan maturing between2009 and 2012 of which 17% bearingfixed rates and 83% bearing floatinginterest rates.OtherCertain debt agreements of the Companyor its subsidiaries contain certain restrictivecovenants. Among other things, thesecovenants limit encumbrances on theassets of ArcelorMittal and its subsidiaries,the ability of ArcelorMittal’s subsidiariesto incur debt and ArcelorMittal’s ability todispose of assets in certain circumstances.Certain of these agreements also requirecompliance with financial maintenancetests, including financial ratios and minimumlevels of net worth.The Company’s principal credit facilitiesalso include the following financialcovenant: the Company must ensurethat the ratio of “Consolidated TotalNet Borrowings” (consolidated totalborrowings less consolidated cash andcash equivalents) to “Consolidated EBITDA”(the consolidated net pre-taxationprofits of the Company for a MeasurementPeriod, subject to certain adjustmentsas defined in the facilities) does not,at the end of each “Measurement Period”(each period of 12 months ending on thelast day of a financial half-year or afinancial year of the Company), exceeda certain ratio. In 2009, the Companysigned agreements with its lendersto amend this ratio (where applicable),referred to as its “Leverage Ratio”,from 3.5 to one as originally provided,to 4.5 to one as of December 31, 2009,to 4.0 to one as of June 30, 2010,and reverting to 3.5 to one as ofDecember 31, 2010.The Company also agreed to theimposition of certain additional temporaryrestrictive covenants on its activities ifthe Leverage Ratio exceeds 3.5 to one forany Measurement Period. These includerestrictions on dividends and sharereductions, acquisitions, capital expenditureand the giving of loans and guarantees.Limitations arising from the restrictiveand financial covenants describedabove could limit the Company’s abilityto distribute dividends, make capitalexpenditures or engage in strategicacquisitions or investments. Failure tocomply with any covenant would enablethe lenders to accelerate the Company’srepayment obligations. Moreover, theCompany’s debt facilities have provisionswhereby certain events relating to otherborrowers within the Company’s subsidiariescould, under certain circumstances, lead toacceleration of debt repayment under suchcredit facilities. Any invocation of thesecross-acceleration or cross-default clausescould cause some or all of the other debt toaccelerate. The Company was in compliancewith the financial covenants contained withinthe amended agreements related to all of itsborrowings as of December 31, 2009.