CALCULATION OF
REGISTRATION FEE
|
Title of each Class of
Securities to be Registered
|
|
Amount
to be
Registered
|
|
Maximum
Offering Price
Per Unit
|
|
Maximum
Aggregate
Offering Price
|
|
Amount
of
Registration Fee
(1)
|
6.875%
Senior Notes due 2025
|
|
$750,000,000
|
|
100.0%
|
|
$750,000,000
|
|
$86,925
|
|
(1)
|
The registration fee is calculated in
accordance with Rule 457(r) under the Securities Act of 1933, as amended.
|
Filed Pursuant to Rule 424(b)(2)
Registration No. 333-209914
P
ROSPECTUS
S
UPPLEMENT
(To prospectus
dated March 3, 2016)
$750,000,000
6.875%
Senior Notes due 2025
We are
offering $750 million aggregate principal amount of 6.875% Senior Notes due 2025 (the “notes”). We will pay
interest on the notes on February 15 and August 15 of each year, beginning February 15, 2018. The notes will
mature on August 15, 2025. We may redeem some or all of the notes on or after August 15, 2020 at the redemption
prices set forth in this prospectus supplement, together with accrued and unpaid interest, if any, to, but excluding, the date
of redemption. In addition, at any time prior to August 15, 2020, we may redeem some or all of the notes at a redemption
price equal to 100% of the principal amount of the notes, together with accrued and unpaid interest, if any, to, but excluding,
the date of redemption, plus a “make-whole” premium. At any time prior to August 15, 2020, we may also redeem
up to 35% of the original aggregate principal amount of the notes with the proceeds of certain equity offerings at the redemption
price set forth in this prospectus supplement, together with accrued and unpaid interest, if any, to, but excluding, the date
of redemption. If a change of control triggering event as described in this prospectus supplement under the heading “Description
of the Notes—Change of Control Offer” occurs, we may be required to offer to purchase the notes from the holders.
The notes
will be our senior and unsecured obligations and will rank equally in right of payment with all of our existing and future senior
indebtedness and senior in right of payment to all of our existing and future subordinated indebtedness. The notes will be effectively
subordinated to any of our existing and future secured indebtedness to the extent of the value of the collateral securing such
indebtedness, including all borrowings under our ABL Credit Agreement and our Senior Secured Notes due 2021 (each as defined herein).
The notes will be structurally subordinated to all liabilities of our subsidiaries.
Investing
in the notes involves risks that are described in the “Risk Factors” section beginning on page S-5 of this
prospectus supplement.
|
|
Per Note
|
|
Total
|
Public offering price
(1)
|
|
|
100
|
%
|
|
$
|
750,000,000
|
|
Underwriting discount
|
|
|
1.50
|
%
|
|
$
|
11,250,000
|
|
Proceeds, before expenses, to us
(1)
|
|
|
98.50
|
%
|
|
$
|
738,750,000
|
|
|
|
(1)
Plus accrued interest from August 4, 2017, if settlement
occurs after that date.
|
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or
determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary
is a criminal offense.
The notes will
be ready for delivery in book-entry form only through the facilities of The Depository Trust Company for the accounts of its participants,
including Euroclear Bank S.A./N.V., as operator of the Euroclear System, and Clearstream Banking,
société anonyme
,
on or about August 4, 2017.
Joint
Book-Running Managers
BofA
Merrill Lynch
|
J.P.
Morgan
|
Barclays
|
Morgan
Stanley
|
PNC
Capital Markets LLC
|
Wells
Fargo Securities
|
Goldman
Sachs & Co. LLC
|
|
|
|
|
|
|
Senior Co-Managers
|
|
BMO Capital Markets
|
COMMERZBANK
|
Scotiabank
|
SunTrust Robinson Humphrey
|
Citigroup
|
ING
|
SOCIETE GENERALE
|
|
Co-Managers
|
|
|
|
|
BNY Mellon Capital Markets, LLC
|
Citizens Capital
Markets
|
Credit Suisse
|
Huntington Capital Markets
|
RBC Capital
Markets
|
US Bancorp
|
The date
of this prospectus supplement is August 1, 2017.
In
making your investment decision, you should rely only on the information contained or incorporated by reference in this prospectus
supplement and the accompanying prospectus. We have not, and the underwriters have not, authorized anyone to provide you with
additional or different information. If anyone provides you with different or inconsistent information, you should not rely on
it. We are not making an offer of these securities in any jurisdiction where the offer is not permitted. You should not assume
that the information contained in or incorporated by reference in this prospectus supplement or the accompanying prospectus is
accurate as of any time subsequent to the date of such information.
TABLE
OF CONTENTS
Prospectus
Supplement
ABOUT
THIS PROSPECTUS SUPPLEMENT
This document
consists of two parts. The first part is the prospectus supplement, which describes the specific terms of this offering and certain
other matters relating to United States Steel Corporation. The second part, the accompanying prospectus, gives more general information
about securities we may offer from time to time, some of which does not apply to this offering. Generally, when we refer to the
prospectus, we are referring to both parts of this document combined. For information about the notes, see “Description
of the Notes” in this prospectus supplement and “Description of the Debt Securities” in the accompanying prospectus.
If the
description in this prospectus supplement differs from the description in the accompanying prospectus, the description in this
prospectus supplement supersedes the description in the accompanying prospectus. If the information set forth in this prospectus
supplement varies in any way from the information set forth in a document we have incorporated by reference, you should rely on
the information in the more recent document.
This prospectus
supplement and the accompanying prospectus are part of a registration statement on Form S-3 that we filed with the Securities
and Exchange Commission (the “SEC”) on March 3, 2016, which became effective automatically upon filing. Before you
invest in the notes, you should read the registration statement, this prospectus supplement and the accompanying prospectus, which
form a part of the registration statement, including the documents incorporated by reference herein. See “Where You Can
Find More Information.”
Where You Can Find More
Information
United
States Steel Corporation files annual, quarterly and current reports, proxy statements and other information with the SEC. You
may read and copy any document we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington,
D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our
SEC filings are also accessible through the Internet at the SEC’s website at http://www.sec.gov. Many of our SEC filings
are also accessible on our website at http://www.ussteel.com. The reference to our website is intended to be an inactive textual
reference only. The information on or connected to our website is not a part of this prospectus supplement or the accompanying
prospectus.
Incorporation of Certain
Information by Reference
The SEC
allows us to “incorporate by reference” into this prospectus supplement the information in documents we file with
it, which means that we can disclose important information to you by referring you to those documents. The information incorporated
by reference is considered to be a part of this prospectus supplement, and later information that we file with the SEC will update
and supersede this information. We incorporate by reference the documents listed below and any filings we make with the SEC under
Section 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), on or
after the date of this prospectus supplement and prior to the termination of the offering under this prospectus supplement (other
than any documents or information deemed to have been furnished and not filed in accordance with the SEC rules). These documents
contain important information about us.
(a) Annual
Report on Form 10-K for the year ended December 31, 2016;
(b) Quarterly
Reports on Form 10-Q for the quarters ended March 31, 2017 and June 30, 2017;
(c) Current
Reports on Form 8-K filed on January 31, 2017, March 2, 2017, March 15, 2017, April 25, 2017 (as to Item 8.01 only), April 28,
2017, May 10, 2017, June 1, 2017, June 30, 2017, July 25, 2017 (as to Items 5.02 and 8.01 only), July 26, 2017, July
31, 2017 and August 1, 2017; and
(d) Definitive
Proxy Statement on Schedule 14A filed on March 14, 2017 (solely to the extent specifically incorporated by reference into U. S.
Steel’s Annual Report on Form 10-K for the year ended December 31, 2016).
Any statement
contained in a document incorporated by reference into this prospectus supplement will be deemed to be modified or superseded
for purposes of this prospectus supplement to the extent that a statement contained herein or in any other subsequently filed
document which is also incorporated by reference herein modifies or supersedes such statement. Any such statement so modified
or superseded will not be deemed to constitute a part of this prospectus supplement, except as so modified or superseded.
Forward-Looking Statements
We include
“forward-looking” statements concerning trends, market forces, commitments, material events and other contingencies
potentially affecting our future performance in this prospectus supplement and in our annual and quarterly reports and other documents
incorporated by reference in this prospectus supplement and the accompanying prospectus. We intend the forward-looking statements
to be covered by the safe harbor provisions for forward-looking statements in Section 27 of the Securities Act of 1933, as amended
(the “Securities Act”), and Section 21E of the Exchange Act. Generally, we have identified such forward-looking statements
by using the words “believe,” “expect,” “intend,” “estimate,” “anticipate,”
“project,” “target,” “forecast,” “aim,” “should,” “will”
and similar expressions or by using future dates in connection with any discussion of, among other things, operating performance,
trends, events or developments that we expect or anticipate will occur in the future, statements relating to volume growth, share
of sales and earnings per share growth, and statements expressing general views about future operating results. However, the absence
of these words or similar expressions does not mean that a statement is not forward-looking. Forward-looking statements are not
historical facts, but instead represent only our beliefs regarding future events, many of which, by their nature, are inherently
uncertain and outside of our control. It is possible that our actual results and financial condition may differ, possibly materially,
from the anticipated results and financial condition indicated in these forward-looking statements. Management believes that these
forward-looking statements are reasonable as of the time made. However, caution should be taken not to place undue reliance on
any such forward-looking statements because such statements speak only as of the date when made. We undertake no obligation to
publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise,
except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from our historical experience and our present expectations or projections. These risks and
uncertainties include, but are not limited to the risks and uncertainties described in “Item 1A. Risk Factors” in
our Annual Report on Form 10-K for the year ended December 31, 2016 and those described from time to time in our future reports
filed with the SEC.
SUMMARY
The
following information supplements, and should be read together with, the information contained or incorporated by reference in
other parts of this prospectus supplement and the accompanying prospectus. This summary highlights selected information from the
prospectus supplement and the accompanying prospectus. As a result, it does not contain all of the information you should consider
before investing in the notes. You should carefully read this prospectus supplement and the accompanying prospectus, including
the documents incorporated by reference herein, which are described under the caption “Incorporation of Certain Information
by Reference” in this prospectus supplement and the accompanying prospectus. If the information in this prospectus supplement
varies in any way from the information set forth in a document we have incorporated by reference, you should rely on the information
in the more recent document.
Unless
the context otherwise requires, references in this prospectus supplement to the “Company,” “U. S. Steel,”
“we,” “us” and “our” are to United States Steel Corporation and its subsidiaries. References
to $ are to U.S. dollars.
See
“Risk Factors” in this prospectus supplement and in our Annual Report on Form 10-K for the year ended December 31,
2016 for factors that you should consider before investing in the notes, and “Forward-Looking Statements” in this
prospectus supplement and “Forward-Looking Statements” in the accompanying prospectus for information relating to
statements contained in this prospectus supplement that are not historical facts.
The Company
U. S.
Steel is an integrated steel producer of flat-rolled and tubular products with major production operations in North America and
Europe. An integrated steel producer uses iron ore and coke as primary raw materials for steel production. U. S. Steel has annual
raw steel production capability of 22.0 million net tons (17.0 million tons in the United States and 5.0 million tons in Europe).
According to worldsteel Association’s latest published statistics, U. S. Steel was the 24th largest steel producer in the
world in 2016. Also in 2016, according to publicly available information, U. S. Steel was the third largest steel producer in
the United States. U.S. Steel is also engaged in other business activities consisting primarily of railroad services and
real estate operations.
U. S.
Steel will continue to evaluate potential strategic and organizational opportunities, which may include the acquisition, divestiture
or consolidation of assets. Given recent market conditions, the cyclicality of our industry and the continued challenges faced
by the Company, we are focused on strategically maintaining and spending cash (including capital investments under our asset revitalization
program), in order to invest in areas consistent with our long-term strategy, and are considering various possibilities, including
exiting lines of business and the sale of certain assets, that we believe would further that goal and ultimately result in a stronger
balance sheet and greater stockholder value. The Company will pursue opportunities based on its long-term strategy and what the
Board of Directors determines to be in the best interests of the Company’s stockholders at the time.
The
Offering
The following
summary contains basic information about this offering. The summary is not intended to be complete. You should read the full text
and more specific details contained elsewhere in this prospectus supplement, as well as the accompanying prospectus. For a more
detailed description of the notes, see “Description of the Notes” in this prospectus supplement and “Description
of the Debt Securities” in the accompanying prospectus.
Issuer
|
United
States Steel Corporation
|
Notes
offered
|
$750
million aggregate principal amount of the notes
|
Maturity
|
August
15, 2025
|
Interest
rate
|
The
notes will bear interest at 6.875% per annum. All interest on the notes will accrue
from August 4, 2017.
|
Interest
payment dates
|
Interest
is payable on the notes on February 15 and August 15 of each year, beginning
on February 15, 2018.
|
Mandatory
offer to repurchase
|
If
a change of control triggering event as described in this prospectus supplement under
the heading “Description of the Notes—Change of Control Offer” occurs,
we may be required to offer to purchase the notes from the holders.
|
Optional
redemption
|
On or
after August 15, 2020, we may redeem the notes, in whole or in part, at our option at any time and from time to time
at the redemption prices listed under “Description of the Notes—Optional Redemption,” plus accrued and unpaid
interest, if any, to, but excluding, the date of redemption.
|
|
We may also redeem the notes,
in whole or in part, at our option at any time and from time to time prior to August 15, 2020 at a price equal
to the greater of:
|
|
·
100%
of the principal amount of the notes to be redeemed; or
|
|
·
the
sum of the present values of the redemption price of the notes to be redeemed if they
were redeemed on August 15, 2020 and all required interest payments due on such
notes through August 15, 2020, exclusive of interest accrued to the date of redemption,
discounted to the date of redemption on a semiannual basis (assuming a 360-day year consisting
of twelve 30-day months) at the applicable Treasury Yield plus 50 basis points, plus
accrued and unpaid interest, if any, to, but excluding, the date of redemption.
At any time prior to
August 15, 2020, we may also redeem up to 35% of the original aggregate principal amount of the notes with the
proceeds of certain equity offerings at a redemption price equal to 106.875% of the principal amount of the notes,
together with accrued and unpaid interest, if any, to, but excluding, the date of redemption.
|
Ranking
|
The
notes will be our senior and unsecured obligations and will rank equally in right of payment with all of our existing and
future senior indebtedness and senior in right of payment to all of our existing and future subordinated indebtedness. The
notes will be effectively subordinated to any of our existing and future secured indebtedness to the extent of the value of
the collateral securing such indebtedness, including all borrowings under our ABL Credit Agreement and our Senior Secured
Notes due 2021 (each as defined herein). The notes will be structurally subordinated to all liabilities of our subsidiaries.
|
|
As
of June 30, 2017, after giving effect to this offering and our use of the net proceeds
therefrom:
·
we
would have had approximately $2,909 million of total indebtedness (including the notes);
·
of
our total indebtedness, we would have had approximately $980 million of secured indebtedness to which the notes would
have been effectively subordinated;
·
our
availability under the USSK Credit Facilities (as defined herein) would have been approximately €248 million (or
approximately $283 million), after giving effect to approximately $2 million of outstanding customs and other guarantees,
and our availability under our ABL Credit Agreement would have been approximately $1,496 million. Our borrowing capacity
under our ABL Credit Agreement may be increased by up to $500 million, subject to certain conditions; and
·
our
subsidiaries would have had approximately $2,376 million of total liabilities on a consolidated basis (including
trade payables but excluding intercompany liabilities), all of which would have been structurally senior to the notes.
|
|
|
Covenants
|
We
will issue the notes under a senior indenture with The Bank of New York Mellon Trust
Company N.A., as trustee. The senior indenture will, among other things, restrict our
ability and the ability of certain of our subsidiaries to:
|
|
·
create
liens on any Principal Property or shares of stock or other equity interests of a subsidiary
that owns any Principal Property to secure indebtedness;
|
|
·
engage
in sale leaseback transactions with respect to any Principal Property; and
|
|
·
consolidate,
merge or transfer all or substantially all of U. S. Steel’s assets.
|
|
These
covenants are subject to important exceptions and qualifications that are described in
“Description of the Notes — Covenants.”
|
|
The
indenture that will govern the notes will not include covenants limiting our ability
and the ability of our subsidiaries to incur debt (other than debt secured by Principal
Property or shares of stock or other equity interests of a subsidiary that owns any Principal
Property), pay dividends or make other distributions, make loans and investments or enter
into transactions with affiliates.
|
Additional
notes
|
The
senior indenture governing the notes will provide for unlimited issuances of additional
notes. See “Description of the Notes — Additional Issuances.”
|
Book-entry
form only
|
The
notes will be issued in book-entry form and will be represented by one or more permanent
global certificates deposited with, or on behalf of, The Depository Trust Company (“DTC”)
and registered in the name of a nominee of DTC. Beneficial interests in any of the notes
will be shown on, and transfers will be effected only through, records maintained by
DTC or its nominee, and any such interest may not be exchanged for certificated securities.
|
Use
of proceeds
|
The
net proceeds from the sale of the notes in this offering are estimated to be approximately $737 million, after deducting underwriting
discounts and expenses payable by us. We intend to use the net proceeds from this offering, together with cash on hand, for
the redemption of all of our 7.00% Senior Notes due 2018, our 6.875% Senior Notes due 2021 and our 7.50% Senior Notes due
2022 and the payment of related fees and expenses. See “Use of Proceeds.”
|
Risk
factors
|
See
“Risk Factors” and the other information included or incorporated by reference in this prospectus supplement for
a discussion of certain factors you should carefully consider before deciding to invest in the notes.
|
RISK
FACTORS
An
investment in the notes involves significant risks. Before investing in the notes, you should carefully consider the risks set
forth in Item 1A of our annual report on Form 10-K for the year ended December 31, 2016, as well as the following risks. The following
risks are not the only risks we face. Additional risks not presently known to us or that we currently deem immaterial may
also impair our business operations or the price of the notes.
Risks Related to an Investment
in the Notes
Our substantial debt
could adversely affect our financial condition and prevent us from fulfilling our obligations under the notes.
We have,
and after the offering will continue to have, a significant amount of debt. As of June 30, 2017, after giving effect to this offering
and our use of the net proceeds therefrom, our total debt would have been approximately $2,909 million, and we would have had
$1,496 million of availability under our ABL Credit Agreement and €248 million (or approximately $283 million) of availability
under the USSK Credit Facilities (after giving effect to approximately $2 million of outstanding customs and other guarantees).
Subject
to the limits contained in our ABL Credit Agreement, the indenture governing the Senior Secured Notes due 2021, the indenture
that will govern the notes and our other debt instruments, we may be able to incur substantial additional debt from time to time
to finance working capital, capital expenditures, investments or acquisitions, or for other purposes. If we do so, the risks related
to our high level of debt could intensify. Specifically, our high level of debt could have important consequences to the holders
of the notes, including the following:
|
·
|
making
it more difficult for us to satisfy our obligations with respect to the notes and our
other debt;
|
|
·
|
limiting
our ability to obtain additional financing to fund future working capital, capital expenditures,
acquisitions or other general corporate requirements;
|
|
·
|
requiring
a substantial portion of our cash flows to be dedicated to debt service payments instead
of other purposes, thereby reducing the amount of cash flows available for working capital,
capital expenditures, acquisitions and other general corporate purposes;
|
|
·
|
increasing
our vulnerability to general adverse economic and industry conditions;
|
|
·
|
exposing
us to the risk of increased interest rates as certain of our borrowings, including borrowings
under our ABL Credit Agreement and the USSK Credit Facilities, are at variable rates
of interest;
|
|
·
|
limiting
our flexibility in planning for and reacting to changes in the industry in which we compete;
|
|
·
|
placing
us at a disadvantage compared to other, less leveraged competitors; and
|
|
·
|
increasing
our cost of borrowing.
|
In addition,
the indenture that will govern the notes, the indenture governing the Senior Secured Notes due 2021, our ABL Credit Agreement
and other debt instruments contain restrictive covenants that limit our ability to engage in activities that may be in our long-term
best interest. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could
result in the acceleration of all our debt.
We may not be able to
generate sufficient cash to service all of our debt, including the notes, and may be forced to take other actions to satisfy our
obligations under our debt, which may not be successful.
Our ability
to make scheduled payments on or refinance our debt obligations, including the notes, depends on our financial condition and operating
performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative,
regulatory and other factors beyond our control. We may be unable to maintain a level of cash flows from operating activities
sufficient to permit us to pay the principal, premium, if any, and interest on our debt, including the notes.
If our
cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems
and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek
additional debt or equity capital or restructure or refinance our debt, including the notes. We may not be able to effect any
such alternative measures, if necessary, on commercially reasonable terms or at all and, even if successful, those alternative
actions may not allow us to meet our scheduled debt service obligations. Our ABL Credit Agreement and the indenture governing
the Senior Secured Notes due 2021 restrict our ability to dispose of assets and use the proceeds from those dispositions and may
also restrict our ability to raise debt or equity capital to be used to repay other debt when it becomes due. We may not be able
to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations then due.
We conduct
a substantial portion of our operations through our subsidiaries, including USSK. However, none of our subsidiaries will guarantee
the notes and certain of our subsidiaries are not required and do not guarantee our other indebtedness. Accordingly, repayment
of our debt, including the notes, is dependent on the generation of cash flow by our subsidiaries, including USSK, and their ability
to make such cash available to us, by dividend, debt repayment or otherwise. Because none of our subsidiaries is a guarantor of
the notes, our subsidiaries do not have any obligation to pay amounts due on the notes or to make funds available for that purpose,
and subsidiaries that are not required and do not guarantee our other indebtedness do not have any obligation to pay amounts due
on such indebtedness or to make funds available for that purpose. Our subsidiaries may not be able to, or may not be permitted
to, make distributions to enable us to make payments in respect of our debt, including the notes. Each subsidiary is a distinct
legal entity, and under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from our
subsidiaries. In the event that we do not receive distributions from our subsidiaries, we may be unable to make required principal
and interest payments on our debt, including the notes.
Our inability
to generate sufficient cash flows to satisfy our debt obligations, or to refinance our debt on commercially reasonable terms or
at all, would materially and adversely affect our financial position and results of operations and our ability to satisfy our
obligations under the notes.
If we
cannot make scheduled payments on our debt, we will be in default and holders of the notes could declare all outstanding principal
and interest to be due and payable, the lenders under our ABL Credit Agreement could terminate their commitments to loan money,
the lenders could foreclose against the assets securing their borrowings and we could be forced into bankruptcy or liquidation.
All of these events could result in your losing your investment in the notes.
The notes do not contain
restrictive financial covenants and we may incur substantially more debt or take other actions which may affect our ability to
satisfy our obligations under the notes. This could further exacerbate the risks to our financial condition described above.
Other
than as described under “Description of the Notes—Covenants—Limitation on Liens” and “—Limitation
on Sale and Leaseback Transactions,” the indenture that will govern the notes will not contain any financial or operating
covenants or restrictions on the incurrence of indebtedness (including secured debt), the payments of dividends or the repurchase
of securities, the making of loans and investments or the entry into transactions with affiliates by us or any of our subsidiaries.
In addition, the limited covenants applicable to the notes do not require us to achieve or maintain any specified financial ratios
or satisfy other financial condition or results of operations tests.
Our ability
to recapitalize, incur additional debt and take a number of other actions that are not limited by the terms of the notes could
have the effect of diminishing our ability to make payments on the notes when due, and require us to dedicate a substantial portion
of our cash flow from operations to payments on our indebtedness, which would reduce the availability of cash flow to fund our
operations, working capital and capital expenditures.
The terms of our ABL
Credit Agreement, and indentures governing the Senior Secured Notes due 2021 and our senior unsecured notes and the indenture
that will govern the notes will restrict our current and future operations, particularly our ability to respond to changes or
to take certain actions.
Our ABL
Credit Agreement, the indentures governing the Senior Secured Notes due 2021 and our senior unsecured notes and the indenture
that will govern the notes contain a number of restrictive covenants that impose significant restrictions on us and may limit
our ability to engage in acts that may be in our long-term best interest, including restrictions on our ability to:
|
·
|
enter
into sale and leaseback transactions; and
|
|
·
|
consolidate,
merge or sell all or substantially all of our assets.
|
As a result
of these restrictions, we may be:
|
·
|
limited
in how we conduct our business;
|
|
·
|
unable
to raise additional debt or equity financing to operate during general economic or business
downturns; or
|
|
·
|
unable
to compete effectively or to take advantage of new business opportunities.
|
These
restrictions may affect our ability to grow in accordance with our strategy. In addition, our financial results, our substantial
debt and our credit ratings could adversely affect the availability and terms of our financing.
There
are limitations on our ability to borrow the full $1.5 billion of commitments under our ABL Credit Agreement. Availability will
be limited to the lesser of a borrowing base and $1.5 billion, less the amount of any borrowings outstanding under our ABL Credit
Agreement. The borrowing base is calculated on a monthly (or more frequent under certain circumstances) valuation of our inventory
and accounts receivable. As a result, our access to credit under our ABL Credit Agreement is potentially subject to significant
fluctuation, depending on the value of the borrowing base-eligible assets as of any measurement date. Since the value of our inventory
and trade accounts receivable less specified reserves calculated in accordance with the ABL Credit Agreement does not support
the full amount of the facility at June 30, 2017, the amount available to the Company under this facility was reduced by $4 million
to $1,496 million. Additionally, U. S. Steel must maintain a fixed charge coverage ratio of at least 1.00 to 1.00 for the most
recent four consecutive quarters when availability under the ABL Credit Agreement is less than the greater of 10 percent of the
total aggregate commitments and $150 million. Based on the most recent four quarters as of June 30, 2017, we have satisfied this
covenant. However, our ability to maintain this fixed charge coverage ratio may be affected by events beyond our control and we
may not be able to meet this ratio in future periods. If we are unable to meet this covenant in future periods, the amount available
to the Company under this facility would be reduced by $150 million. Moreover, our ABL Credit Agreement provides the collateral
agent considerable discretion to impose reserves or reduce facility availability, which could materially impair the amount of
borrowings that would otherwise be available to us. The impact of taking any such actions could materially and adversely impair
our ability to make interest payments on the notes. The inability to borrow under our ABL Credit Agreement may adversely affect
our liquidity, financial position and results of operations.
A breach
of the covenants or restrictions under the indentures governing the Senior Secured Notes due 2021 and our senior unsecured notes,
the indenture that will govern the notes or under our ABL Credit Agreement could result in an event of default under the applicable
debt. Such default may allow the creditors to accelerate the related debt and may result in the acceleration of any other debt
to which a cross-acceleration or cross-default provision applies. In addition, an event of default under our ABL Credit Agreement
would permit the lenders under our ABL Credit Agreement to terminate all commitments to extend further credit under that facility.
Furthermore, if we were unable to repay the amounts due and payable under our ABL Credit Agreement, those lenders could proceed
against the ABL Collateral. In the event our lenders or noteholders accelerate the repayment of our borrowings, we and our subsidiaries
may not have sufficient assets to repay that debt.
Our variable rate debt
subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.
Borrowings
under our ABL Credit Agreement and the USSK Credit Facilities are at variable rates of interest and expose us to interest rate
risk. If interest rates were to increase, our debt service obligations on the variable rate debt would increase even though the
amount borrowed remained the same, and our net income and cash flows, including cash available for servicing our debt, will correspondingly
decrease. Assuming all loans under our ABL Credit Agreement and the USSK Credit Facilities were fully drawn, each quarter point
change in interest rates would result in a $4 million change in annual interest expense on our debt under our ABL Credit Agreement
and the USSK Credit Facilities. In the future, we may enter into interest rate swaps that involve the exchange of floating for
fixed rate interest payments in order to reduce interest rate volatility. However, we may not maintain interest rate swaps with
respect to all of our variable rate debt, and any swaps we enter into may not fully mitigate our interest rate risk.
The notes will be effectively
junior to the ABL Credit Agreement, the Senior Secured Notes due 2021 and any other secured indebtedness that we may issue in
the future.
The notes
are unsecured. Holders of our secured debt may foreclose on the assets securing such debt, reducing the cash flow from the foreclosed
property available for payment of unsecured debt, including the notes. We have granted the lenders under our $1.5 billion ABL
Credit Agreement a first lien on certain of our domestic inventories and certain accounts receivable and we have granted to the
holders of our Senior Secured Notes due 2021 a first lien on substantially all of the other tangible and intangible assets of
U. S. Steel’s domestic flat-rolled business. Holders of our secured debt also would have priority over unsecured creditors
to the extent of the value of the collateral securing such indebtedness in the event of a bankruptcy, liquidation or similar proceeding.
As a result, the notes will be effectively junior to the ABL Credit Agreement, Senior Secured Notes due 2021, secured obligations
under capital leases and any secured debt that we may issue in the future to the extent of the value of the collateral securing
such indebtedness.
The notes are obligations
exclusively of U. S. Steel and not of our subsidiaries, and payment to holders of the notes will be structurally subordinated
to the claims of our subsidiaries’ creditors.
The notes
are not guaranteed by any of our subsidiaries. As a result, the notes will be structurally subordinated to all indebtedness or
guarantees of indebtedness and other liabilities, including trade payables, of each of our subsidiaries. As of June 30, 2017,
after giving effect to this offering and our use of the net proceeds therefrom, our subsidiaries would have had approximately
$2,376 million of total liabilities on a consolidated basis (including trade payables but excluding intercompany liabilities),
all of which would have been structurally senior to the notes. In addition, the indenture governing the notes does not restrict
the future incurrence of liabilities or issuances of preferred stock, including unsecured indebtedness or guarantees of indebtedness,
by our subsidiaries.
We may not be able to
repurchase the notes upon a change of control repurchase event.
Upon the
occurrence of a change of control repurchase event, we will be required to offer to repurchase all outstanding notes at 101% of
their principal amount, plus accrued and unpaid interest to the purchase date, and we will be similarly required to offer to repurchase
our Senior Secured Notes due 2021 and our senior unsecured notes. Additionally, under our ABL Credit Agreement, a change of control
(as defined therein) may constitute an event of default that permits the lenders to accelerate the maturity of borrowings under
our ABL Credit Agreement and the commitments to lend would terminate. The source of funds for any purchase of the notes, our Senior
Secured Notes due 2021 and our senior unsecured notes and repayment of borrowings under our ABL Credit Agreement will be our available
cash
on hand or cash generated from our subsidiaries’ operations or other sources, including borrowings, sales
of assets or sales of equity. We may not be able to repurchase the notes upon the occurrence of a change of control repurchase
event because we may not have sufficient financial resources to purchase all of the debt securities that are tendered upon a change
of control repurchase event and repay our other debt that will become due. If we fail to repurchase the notes in that circumstance,
we will be in default under the indenture that will govern the notes. We may require additional financing from third parties to
fund any such purchases, and we may be unable to obtain financing on satisfactory terms or at all. Further, our ability to repurchase
the notes may be limited by law. In order to avoid the obligations to repurchase the notes and events of default and potential
breaches of our ABL Credit Agreement, we may have to avoid certain change of control transactions that would otherwise be beneficial
to us.
In addition,
certain important corporate events, such as leveraged recapitalizations, may not, under the indenture that will govern the notes,
constitute a change of control repurchase event that would require us to repurchase the notes, even though those corporate events
could increase the level of our debt or otherwise adversely affect our capital structure, credit ratings or the value of the notes.
See “Description of the Notes—Change of Control Offer.”
The exercise
by the holders of notes of their right to require us to repurchase the notes pursuant to a change of control offer could cause
a default under the agreements governing our other debt, including future agreements, even if the change of control itself does
not, due to the financial effect of such repurchases on us. In the event a change of control offer is required to be made at a
time when we are prohibited from purchasing notes, we could attempt to refinance the borrowings that contain such prohibitions.
If we do not obtain a consent or repay those borrowings, we will remain prohibited from purchasing notes. In that case, our failure
to purchase tendered notes would constitute an event of default under the indenture which could, in turn, constitute a default
under our other debt. Finally, our ability to pay cash to the holders of notes upon a repurchase may be limited by our then existing
financial resources.
The market price of the
notes may decline if we enter into a transaction that does not constitute a change of control under the indenture that will govern
the notes or if a change of control repurchase event does not occur for other reasons.
The term
“change of control” (which will be defined in the indenture that will govern the notes) is limited in its scope and
does not include many events that might cause the market price of the notes to decline. Furthermore, we are required to offer
to repurchase the notes only upon the occurrence of a change of control repurchase event. Such an event occurs only if, as a result
of such change of control, the notes receive certain reductions in ratings, and the rating agencies assigning the ratings expressly
link the reductions in ratings to the change of control. As a result, our obligation to offer to repurchase the notes upon the
occurrence of a change of control is limited, even though the market price of the notes may decline significantly in the event
of a highly leveraged transaction, reorganization, merger or similar transaction.
Although
our Senior Secured Notes due 2021 and our senior unsecured notes generally have the same change of control protection as the notes,
certain of our other creditors, such as the lenders under our ABL Credit Agreement, have broader change of control protection.
There
is no public market for the notes, which could limit their market price or your ability to sell them.
The notes
are a new issue of securities for which there currently is no trading market. As a result, a market may not develop for the notes
and you may not be able to sell your notes. Any notes that are traded after their initial issuance may trade at a discount from
their initial offering price. Future trading prices of the notes will depend on many factors, including prevailing interest rates,
the market for similar securities, general economic conditions and our financial condition, performance and prospects. Accordingly,
you may be required to bear the financial risk of an investment in the notes for an indefinite period of time. We do not intend
to apply for listing or quotation of the notes on any securities exchange or automated quotation system. While the underwriters
may make a market in the notes they are not required to do so and consequently any market making with respect to the notes may
be discontinued at any time without notice. Even if the underwriters make a market in the notes the liquidity of such a market
may be limited. See “Underwriting.”
Changes
in our credit ratings or the debt markets may adversely impact the market price of the notes.
The price
for the notes will depend on a number of factors, including:
|
·
|
our
credit ratings with major credit rating agencies;
|
|
·
|
the
prevailing interest rates being paid by other companies that investors consider to be
comparable to us;
|
|
·
|
the
market price of our other debt securities;
|
|
·
|
our
financial condition, operating results and future prospects; and
|
|
·
|
the
overall condition of the financial markets and global and domestic economies.
|
The condition
of the financial markets and prevailing interest rates have fluctuated in the past and are likely to fluctuate in the future.
Such fluctuations could have an adverse effect on the price of the notes. In addition, credit rating agencies continually review
their ratings for the companies that they follow, including us, and the industries in which we operate as a whole. If in the future
one or more rating agencies reduce or withdraw their rating, change their outlook or place the notes on “watch list,”
the market price of the notes may be adversely affected.
USE
OF PROCEEDS
The net
proceeds from the sale of the notes in this offering are estimated to be approximately $737 million, after deducting underwriting
discounts and expenses payable by us. We intend to use the net proceeds from this offering, together with cash on hand, for the
redemption of all of our 7.00% Senior Notes due 2018, our 6.875% Senior Notes due 2021 and our 7.50% Senior Notes due 2022 and
the payment of related fees and expenses.
Certain
of the underwriters and/or their affiliates may hold a portion of our 7.00% Senior Notes due 2018, 6.875% Senior Notes due 2021
or 7.50% Senior Notes due 2022. Accordingly, such underwriters and/or their affiliates will receive a portion of the proceeds
from this offering upon the redemption of such notes. See “Underwriting.”
RATIO
OF EARNINGS TO FIXED CHARGES
The following
table sets forth the ratio of our earnings to fixed charges for the periods indicated:
|
|
Six Months Ended
|
|
|
Year Ended December 31,
|
|
|
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June 30, 2017
|
|
|
2016
|
|
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2015
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
Ratio of earnings to fixed charges(a)
|
|
|
1.46
|
|
|
|
(b)
|
|
|
|
(c)
|
|
|
|
1.07
|
|
|
|
(d)
|
|
|
|
(e)
|
|
|
(a)
|
For
the purposes of calculating the ratio of earnings to fixed charges, “earnings”
are defined as income before income taxes and extraordinary items and before adjustment
for noncontrolling interests in consolidated subsidiaries or income (loss) from equity
investees, and capitalized interest, plus fixed charges, amortization of capitalized
interest and distributions from equity investees. “Fixed charges” consist
of interest, whether expensed or capitalized, on all indebtedness, amortization of premiums,
discounts and capitalized expenses related to indebtedness, and an interest component
equal to one-third of rental expense, representing the portion of rental expense that
management believes is attributable to interest.
|
|
(b)
|
Earnings
did not cover fixed charges by $509 million.
|
|
(c)
|
Earnings
did not cover fixed charges by $1,500 million.
|
|
(d)
|
Earnings
did not cover fixed charges by $2,278 million.
|
|
(e)
|
Earnings
did not cover fixed charges by $80 million.
|
CAPITALIZATION
The following
table sets forth our cash and cash equivalents and our capitalization as of June 30, 2017:
|
·
|
on
an actual basis; and
|
|
·
|
on
an as adjusted basis to give effect to the sale of the notes offered hereby and the application
of the net proceeds therefrom, together with cash on hand, as described under the caption
“Use of Proceeds.”
|
You should
read the following table in conjunction with the sections entitled “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and our financial statements and notes included in our most recent Annual Report on
Form 10-K and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, both of which are incorporated by reference
into this prospectus supplement.
|
|
As of June 30, 2017
|
|
|
|
(In millions)
|
|
|
|
Actual
|
|
|
As adjusted
|
|
Total cash and cash equivalents
|
|
$
|
1,522
|
|
|
$
|
1,473
|
|
Debt:
|
|
|
|
|
|
|
|
|
6.65% Senior Notes due 2037
|
|
|
350
|
|
|
|
350
|
|
7.50% Senior Notes due 2022
|
|
|
400
|
|
|
|
—
|
|
6.875% Senior Notes due 2021
|
|
|
200
|
|
|
|
—
|
|
8.375% Senior Secured Notes due 2021
|
|
|
980
|
|
|
|
980
|
|
7.375% Senior Notes due 2020
|
|
|
432
|
|
|
|
432
|
|
7.00% Senior Notes due 2018
|
|
|
161
|
|
|
|
—
|
|
Notes offered hereby
|
|
|
—
|
|
|
|
750
|
|
Environmental revenue bonds
|
|
|
411
|
|
|
|
411
|
|
Fairfield caster lease
|
|
|
26
|
|
|
|
26
|
|
Other capital leases and all other obligations
|
|
|
1
|
|
|
|
1
|
|
ABL Credit Agreement
(1)
|
|
|
—
|
|
|
|
—
|
|
USSK Credit Facilities
(2)
|
|
|
—
|
|
|
|
—
|
|
Less discounts and deferred issuance costs
|
|
|
(34
|
)
|
|
|
(41
|
)
|
Total Debt
|
|
$
|
2,927
|
|
|
$
|
2,909
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
Total Stockholders’ Equity
(3)
|
|
$
|
2,555
|
|
|
$
|
2,555
|
|
Total Capitalization
|
|
$
|
5,482
|
|
|
$
|
5,464
|
|
|
(1)
|
Availability under our ABL Credit Agreement is limited to
the lesser of a borrowing base and $1.5 billion, less the amount of any borrowings outstanding under our ABL Credit Agreement.
As of June 30, 2017, our availability under our ABL Credit Agreement would have been approximately $1,496 million. Our borrowing
capacity under our ABL Credit Agreement may be increased by up to $500 million, subject to certain conditions. See “Description
of Other Indebtedness” for a description of the terms of our ABL Credit Agreement and a discussion of certain limitations
to our availability of borrowings thereunder.
|
|
(2)
|
The USSK Credit Facilities provide for borrowing capacity
of up to €250 million. As of June 30, 2017, after giving effect to this offering and our use of the net proceeds therefrom,
we would have had availability of €248 million (or approximately $283 million) under the USSK Credit Facilities (after giving
effect to approximately $2 million of outstanding customs and other guarantees). See “Description of Other Indebtedness”
for a description of the terms of the USSK Credit Facilities.
|
|
(3)
|
As adjusted total stockholders’ equity does not reflect
non-recurring expenses we expect to incur in connection with this offering, including fees to investment bankers, attorneys and
accountants, the write-off of discounts and deferred issuance costs and other transaction-related costs that will not be capitalized.
|
DESCRIPTION
OF OTHER INDEBTEDNESS
The following are summaries
of the terms of our principal indebtedness. These summaries do not purport to be complete descriptions of all of the terms of
the underlying agreements.
ABL Credit Agreement
On July
27, 2015, we entered into a five-year Third Amended and Restated Credit Agreement (the “ABL Credit Agreement”), replacing
our prior $875 million credit facility agreement. Our ABL Credit Agreement increased the amount of our facility to $1.5 billion.
On February 24, 2016, we entered into an amendment to our ABL Credit Agreement (the “ABL Amendment”) that updated
certain definitions within our ABL Credit Agreement to conform with the definitions of similar terms used in the indentures governing
our existing senior unsecured notes.
Purpose
Borrowings under
our ABL Credit Agreement are available for general corporate purposes, including permitted acquisitions, working capital, and
the issuance of letters of credit.
Borrowing base and availability
Availability
under our ABL Credit Agreement is limited to the lesser of a borrowing base and $1.5 billion, less the amount of any borrowings
outstanding under our ABL Credit Agreement. The borrowing base is calculated on a monthly (or more frequent under certain circumstances)
valuation of our inventory and accounts receivable. However, since the value of our inventory and trade accounts receivable less
specified reserves calculated in accordance with the ABL Credit Agreement does not support the full amount of the facility at
June 30, 2017, the amount available to the Company under this facility was reduced by $4 million to $1,496 million. Additionally,
U. S. Steel must maintain a fixed charge coverage ratio of at least 1.00 to 1.00 for the most recent four consecutive quarters
when availability under the ABL Credit Agreement is less than the greater of 10 percent of the total aggregate commitments and
$150 million. Based on the most recent four quarters as of June 30, 2017, we have satisfied this covenant. However, our ability
to maintain this fixed charge coverage ratio may be affected by events beyond our control and we may not be able to meet this
ratio in future periods. If we are unable to meet this covenant in future periods, the amount available to the Company under this
facility would be reduced by $150 million.
As of June 30,
2017, there were no amounts drawn under our ABL Credit Agreement. As of June 30, 2017, our borrowing capacity under our ABL Credit
Agreement would have been approximately $1,496 million.
Our borrowing
capacity under our ABL Credit Agreement may be increased by up to $500 million, subject to certain conditions including lenders
agreeing to provide such increase.
Interest and maturity
Our ABL Credit
Agreement provides for borrowings at annual interest rates based on defined, short-term market rates plus a spread based on availability
and we are obligated to pay a commitment fee on the undrawn portion of the facility. Such interest and commitment fee is payable
quarterly in arrears. Our ABL Credit Agreement matures in July 2020. The maturity will be accelerated to the date which is 91
days prior to the stated maturity of any series of our senior notes if excess cash and credit facility availability do not meet
the liquidity conditions set forth in our ABL Credit Agreement.
Prepayments
Voluntary prepayments
are permitted in whole or in part, in minimum amounts as set forth in our ABL Credit Agreement, with prior notice but without
premium or penalty.
Collateral and guarantees
Borrowings
under our ABL Credit Agreement are secured by first-priority liens on certain domestic inventory and trade accounts receivable
of U. S. Steel and the guarantors. Certain of our direct and indirect domestic subsidiaries have guaranteed our ABL Credit Agreement,
including certain subsidiaries in our Tubular segment.
Covenants and other matters
In addition to
the fixed charge coverage ratio covenant described above, our ABL Credit Agreement contains other customary terms and conditions
including, among other things, restrictions on our ability to create certain liens and to consolidate, merge or transfer all,
or substantially all, of our assets. The ABL Amendment increased the threshold for incurrence of additional secured debt from
10% to 15% of Consolidated Net Tangible Assets (as defined in our ABL Credit Agreement).
USSK €200 million Unsecured
Revolving Credit Facility
On February 22,
2016, U. S. Steel Košice s.r.o. (“USSK”) entered into a €200 million unsecured revolving credit facility
(the “USSK Credit Agreement”).
Purpose
Borrowings under
the USSK Credit Agreement are available for general corporate purposes. As of June 30, 2017, USSK had no borrowings under the
USSK Credit Agreement and had availability of €200 million (or approximately $228 million).
Interest and maturity
The USSK Credit
Agreement bears interest at the applicable inter-bank offer rate plus a margin and USSK is obligated to pay a commitment fee on
the undrawn portion of the facility. The USSK Credit Agreement expires on July 15, 2020.
Collateral and guarantees
The USSK Credit
Agreement is unsecured and USSK is the sole obligor under the USSK Credit Agreement.
Covenants and other matters
The USSK Credit
Agreement includes customary terms and conditions including, among others, covenants that limit USSK’s ability to incur
liens, sell assets, incur indebtedness or enter into any merger or similar arrangement. In addition, the USSK Credit Agreement
includes financial covenants related to maximum leverage, maximum net debt to tangible net worth and minimum interest coverage
ratios. These financial covenants are measured semi-annually for the period covering the last twelve calendar months. USSK may
not draw on the USSK Credit Agreement until the next measurement date if it does not comply with any of the financial covenants.
USSK €40 million Unsecured
Revolving Credit Facility
On December 14,
2015, USSK entered into a €40 million unsecured revolving credit facility (the “2015 USSK Facility”), which replaced
a €20 million unsecured revolving credit facility that expired in December 2015.
Purpose
The 2015 USSK
Facility is available for general corporate purposes, including as an overdraft facility and for the issuance of guarantees and
letters of credit. As of June 30, 2017, USSK had no borrowings under the 2015 USSK Facility and availability was €40 million
(or approximately $46 million).
Interest and maturity
The 2015 USSK
Facility bears interest at the applicable inter-bank offer rate plus a margin and USSK is obligated to pay a commitment fee on
the undrawn portion of the facility. The 2015 USSK Facility expires on December 17, 2018.
Collateral and guarantees
The 2015 USSK
Facility is unsecured and USSK is the sole obligor under the 2015 USSK Facility.
Covenants and other matters
The 2015 USSK
Facility includes customary terms and conditions, including, among others, covenants that limit USSK’s ability to incur
liens, sell assets, incur indebtedness or enter into any merger or similar arrangement.
USSK €10 million Unsecured
Credit Facility
On December 6,
2013, USSK entered into a €10 million unsecured credit facility, as amended on December 4, 2015 and as further amended on
October 31, 2016 (the “2013 USSK Facility” and, together with the USSK Credit Agreement and the 2015 USSK Facility,
the “USSK Credit Facilities”). Under the amended terms of the 2013 USSK Facility, USSK may draw up to €10 million
until December 29, 2017.
Purpose
The 2013 USSK
Facility is available as an overdraft facility, and for the issuance of guarantees and letters of credit. As of June 30, 2017,
USSK had no borrowings under the 2013 USSK Facility and the availability was €8 million (or approximately $9 million)
due to approximately $2 million of outstanding customs and other guarantees.
Interest and maturity
The 2013 USSK
Facility bears interest at the applicable inter-bank offer rate plus a margin and USSK is obligated to pay a commitment fee on
the undrawn portion of the facility. The 2013 USSK Facility expires on December 30, 2017, subject to two one-year extensions at
the mutual consent of USSK and the lender under the facility.
Collateral and guarantees
The 2013 USSK
Facility is unsecured and USSK is the sole obligor under the 2013 USSK Facility.
Covenants and other matters
The 2013 USSK
Facility includes customary terms and conditions including, among others, covenants that limit USSK’s ability to incur liens
or enter into any merger or similar arrangement.
Senior Unsecured Notes
Beginning on
May 21, 2007, we issued several series of unsecured senior notes under a single base indenture. Each series of senior notes was
issued pursuant to a supplemental indenture, containing terms specific to that series of notes.
None of the senior
notes are guaranteed by our subsidiaries.
Covenants and other matters
The senior notes
contain customary terms and conditions including, among other things, limitations on liens and sale-leasebacks, the obligation
to make an offer to repurchase the notes upon a change of control repurchase event (as defined in the applicable supplemental
indenture), and limitations on our ability to consolidate, merge or transfer all, or substantially all, of our assets.
Set forth below are the principal
additional terms of each outstanding series of senior notes.
2018 Senior Notes
On December 10,
2007, we issued $500 million in aggregate principal amount of our 7.00% Senior Notes due 2018 (the “2018 Senior Notes”).
In 2016, the Company completed a cash tender offer and open market purchases of approximately $339 million in aggregate amount
of the 2018 Senior Notes. As of June 30, 2017, $161 million in aggregate principal amount of the 2018 Senior Notes were outstanding.
We will use a portion of the net proceeds from this offering to redeem the 2018 Senior Notes.
Interest and maturity
The 2018 Senior
Notes bear interest at 7.00% per annum. Accrued interest is paid semiannually on February 1 and August 1 of each year. The 2018
Senior Notes will mature on February 1, 2018.
Optional redemption
We may
redeem the 2018 Senior Notes in whole or in part at any time, at a redemption price equal to the greater of (a) 100% of the principal
amount of the 2018 Senior Notes to be redeemed or (b) the sum of the present values of the remaining scheduled payments of principal
and interest on the 2018 Senior Notes, exclusive of interest accrued to the date of redemption, discounted to the date of redemption
on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the applicable Treasury Yield (as defined
therein) plus 50 basis points, plus accrued interest to the date of redemption.
2020 Senior Notes
On March 19,
2010, we issued $600 million in aggregate principal amount of our 7.375% Senior Notes due 2020 (the “2020 Senior Notes”).
In 2016, the Company completed a cash tender offer and open market purchases of approximately $168 million in aggregate principal
amount of the 2020 Notes. As of June 30, 2017, $432 million in aggregate principal amount of the 2020 Senior Notes were outstanding.
Interest and maturity
The 2020 Senior
Notes bear interest at 7.375% per annum. Accrued interest is paid semiannually on April 1 and October 1 of each year. The 2020
Senior Notes will mature on April 1, 2020.
Optional redemption
We may redeem
the 2020 Senior Notes in whole or in part at any time, at a redemption price equal to the greater of (a) 100% of the principal
amount of the 2020 Senior Notes to be redeemed or (b) the sum of the present values of the remaining scheduled payments of principal
and interest on the 2020 Senior Notes, exclusive of interest accrued to the date of redemption, discounted to the date of redemption
on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the applicable Treasury Yield (as defined
therein) plus 50 basis points, plus accrued interest to the date of redemption.
2021 Senior Notes
On March 26,
2013, we issued $275 million in aggregate principal amount of our 6.875% Senior Notes due 2021 (the “2021 Senior Notes”).
In 2016, the Company completed a cash tender offer and open market purchases of approximately $75 million in aggregate principal
amount of the 2021 Notes. As of June 30, 2017, $200 million in aggregate principal amount of the 2021 Senior Notes were outstanding.
We will use a portion of the net proceeds from this offering to redeem the 2021 Senior Notes.
Interest and maturity
The 2021 Senior
Notes bear interest at 6.875% per annum. Accrued interest is paid semiannually on April 1 and October 1 of each year. The 2021
Senior Notes will mature on April 1, 2021.
Optional redemption
We may
redeem the 2021 Senior Notes, at our option, at any time in whole or from time to time in part, upon not less than 30 nor more
than 60 days’ notice, at the redemption prices (expressed in percentages of principal amount) listed below, plus accrued
and unpaid interest on the 2021 Senior Notes, if any, to, but excluding, the applicable redemption date, if redeemed during the
twelve-month period beginning on April 1 of the years indicated below.
|
|
|
|
Year
|
|
Percentage
|
|
2017
|
|
|
103.438
|
%
|
2018
|
|
|
101.719
|
%
|
2019 and thereafter
|
|
|
100.000
|
%
|
2022 Senior Notes
On March 15,
2012, we issued $400 million in aggregate principal amount of our 7.500% Senior Notes due 2022 (the “2022 Senior Notes”).
We will use a portion of the net proceeds from this offering to redeem the 2022 Senior Notes.
Interest and maturity
The 2022
Senior Notes bear interest at 7.500% per annum. Accrued interest is paid semiannually on March 15 and September 15 of each year.
The 2022 Senior Notes will mature on March 15, 2022.
Optional redemption
We may redeem
the 2022 Senior Notes, at our option, at any time in whole or from time to time in part, at the redemption prices (expressed in
percentages of the principal amount) listed below, plus accrued and unpaid interest on the 2022 Senior Notes, if any, to, but
excluding, the applicable redemption date, if redeemed during the twelve-month period beginning on March 15 of the years indicated
below.
|
|
|
|
Year
|
|
Percentage
|
|
2017
|
|
|
103.750
|
%
|
2018
|
|
|
102.500
|
%
|
2019
|
|
|
101.250
|
%
|
2020 and thereafter
|
|
|
100.000
|
%
|
2037 Senior Notes
On May 21, 2007,
we issued $350 million in aggregate principal amount of our 6.65% Senior Notes due 2037 (the “2037 Senior Notes”).
Interest and maturity
The 2037 Senior
Notes bear interest at 6.65% per annum. Accrued interest is paid semiannually on June 1 and December 1 of each year. The 2037
Senior Notes will mature on June 1, 2037.
Optional redemption
We may redeem
the 2037 Senior Notes in whole or in part at any time, at a redemption price equal to the greater of (a) 100% of the principal
amount of the 2037 Senior Notes to be redeemed or (b) the sum of the present values of the remaining scheduled payments of principal
and interest on the 2037 Senior Notes, exclusive of interest accrued to the date of redemption, discounted to the date of redemption
on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the applicable Treasury Yield (as defined
therein) plus 30 basis points, plus accrued interest to the date of redemption.
2021 Senior Secured Notes
On May 10, 2016,
we issued $980 million of 8.375% Senior Secured Notes due 2021 (the “2021 Senior Secured Notes”).
Interest and maturity
The 2021 Senior
Secured Notes bear interest at 8.375% per annum. Accrued interest is paid semiannually on January 1 and July 1 of each year. The
2021 Senior Secured Notes will mature on July 1, 2021.
Collateral and Guarantee
s
The 2021 Senior
Secured Notes are secured by first-priority liens on substantially all of the tangible and intangible assets of U. S. Steel’s
domestic flat-rolled business, exclusive of the collateral securing the obligations under our ABL Credit Agreement. Certain of
our direct and indirect domestic subsidiaries have guaranteed the 2021 Senior Secured Notes, excluding subsidiaries in our Tubular
segment.
Optional Redemption
On or after July
1, 2018, we may redeem the 2021 Senior Secured Notes at our option, at any time in whole or from time to time in part, at the
redemption prices (expressed in percentages of the principal amount) listed below, plus accrued and unpaid interest to, but excluding,
the applicable redemption date, if redeemed during the twelve-month period beginning on July 1 of each of the years indicated
below.
Year
|
|
Percentage
|
|
2018
|
|
|
106.28
|
%
|
2019
|
|
|
104.19
|
%
|
2020 and thereafter
|
|
|
100.000
|
%
|
Prior to July
1, 2018, we may on any one or more occasions redeem up to 35% of the original aggregate principal amount of the 2021 Senior Secured
Notes with the net cash proceeds of one or more equity offerings at a redemption price equal to 108.375% of the principal amount
of the 2021 Senior Secured Notes, plus accrued and unpaid interest to, but excluding, the applicable redemption date.
In addition,
at any time prior to July 1, 2018, we may on any one or more occasions redeem some or all of the 2021 Senior Secured Notes at
a redemption price equal to 100% of the principal amount of the 2021 Senior Secured Notes, together with accrued and unpaid interest,
if any, to the date of redemption, plus a “make-whole” premium.
Covenants and other matters
The 2021 Senior
Secured Notes contain customary terms and conditions including, among other things, limitations on liens and sale-leasebacks,
the obligation to make an offer to repurchase the 2021 Senior Secured Notes upon a change of control repurchase event (as defined
in the indenture governing the 2021 Senior Secured Notes), and limitations on our ability to consolidate, merge or transfer all,
or substantially all, of our assets. In addition, upon the occurrence of certain assets sales, we may be required to use the net
proceeds from such asset sales to make an offer to repurchase the 2021 Senior Secured Notes at a price equal to 100% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the date of repurchase.
Environmental Revenue Bonds
As of June
30, 2017, we had several series of environmental revenue bonds in an aggregate principal amount of $411 million outstanding.
These series of environmental revenue bonds bear interest at rates between 5.50% and 6.88% per annum and they will mature between
2017 and 2042.
DESCRIPTION
OF THE NOTES
The following
description of the particular terms of the notes offered by this prospectus supplement supplements the description of the general
terms and provisions of the debt securities set forth in the accompanying prospectus following the caption “Description
of the Debt Securities.”
In this
description of the notes, the terms “Company,” “we,” “us” and similar words refer only to
United States Steel Corporation and not to any of its subsidiaries. The notes constitute a separate series under the senior indenture.
The notes
will be issued under a senior indenture dated May 21, 2007, as amended and supplemented, between us and The Bank of New York Mellon,
as trustee. The senior indenture is subject to and is governed by the Trust Indenture Act of 1939, as amended. We have filed a
form of the senior indenture as an exhibit to the registration statement of which the accompanying prospectus forms a part. The
following description summarizes selected provisions of the senior indenture and the notes. It does not restate the senior indenture
or the terms of the notes in their entirety. We urge you to read the forms of the senior indenture and the notes because the senior
indenture and the notes define the rights of noteholders.
General
The notes:
|
·
|
will
be our senior unsecured obligations;
|
|
·
|
will
mature on August 15, 2025;
|
|
·
|
will
be subject to earlier redemption at our option as described following the caption “—
Optional Redemption”;
|
|
·
|
will
not have the benefit of any sinking fund;
|
|
·
|
will
not be convertible into any other security;
|
|
·
|
will
be issued in denominations of $1,000 and in integral multiples of $1,000 thereof; and
|
|
·
|
will
be represented by one or more registered notes in global form but in certain limited
circumstances may be represented by notes in certificated form. See “Book-Entry
Issuance.”
|
Interest
on the notes will:
|
·
|
accrue
at the rate of 6.875% per annum;
|
|
·
|
accrue
from August 4, 2017 or the most recent interest payment date on which interest
was paid;
|
|
·
|
be
payable in cash semi-annually in arrears on February 15 and August 15 of
each year, commencing on February 15, 2018;
|
|
·
|
be
payable to the holders of record on the February 1 and August 1 immediately
preceding the related interest payment date; and
|
|
·
|
be
computed on the basis of a 360-day year comprised of twelve 30-day months.
|
If any
interest payment date or maturity date falls on a day that is not a business day, the required payment of principal or interest
will be made on the next business day as if made on the date that payment was due, and no interest will accrue on that payment
for the period from and after the interest payment date or maturity date, as the case may be, to the date of the payment on the
next business day.
Ranking
The notes
will be our senior and unsecured indebtedness and will rank equally with all of our other existing and future senior and unsecured
indebtedness. The notes will effectively rank junior to any of our existing and future secured indebtedness, including all borrowings
under our ABL Credit Agreement and our Senior Secured Notes due 2021, to the extent of the assets securing such indebtedness and
will be structurally subordinated to any indebtedness and other liabilities of our subsidiaries. Indebtedness of our subsidiaries
and obligations and liabilities of our subsidiaries are structurally senior to the notes since, in the event of our bankruptcy,
liquidation, dissolution, reorganization or other winding up, the assets of our subsidiaries will be available to pay the notes
only after the subsidiaries’ indebtedness and obligations and liabilities are paid in full. Because we generally stand as
an equity holder, rather than a creditor, of our subsidiaries, creditors of those subsidiaries will have their debt satisfied
out of the subsidiaries’ assets before our creditors, including the noteholders.
As of
June 30, 2017, after giving effect to this offering and our use of the net proceeds therefrom:
|
·
|
we
would have had approximately $2,909 million of total indebtedness (including the notes);
|
|
·
|
of
our total indebtedness, we would have had approximately $980 million of secured indebtedness
to which the notes would have been effectively subordinated;
|
|
·
|
our
availability under the USSK Credit Facilities (as defined herein) would have been approximately
€248 million (or approximately $283 million), after giving effect to approximately
$2 million of outstanding customs and other guarantees, and our availability under our
ABL Credit Agreement would have been approximately $1,496 million. Our borrowing capacity
under our ABL Credit Agreement may be increased by up to $500 million, subject to certain
conditions; and
|
|
·
|
our
subsidiaries would have had approximately $2,376 million of total liabilities
on a consolidated basis (including trade payables but excluding intercompany liabilities),
all of which would have been structurally senior to the notes.
|
Additional Issuances
We may
issue additional notes, without limitation and without your consent. If we issue additional notes offered by this prospectus supplement
under the senior indenture, they will have the same terms and conditions as the notes being offered by this prospectus supplement
in all respects (except for the payment of interest accruing prior to the issue date of the additional notes) so that the additional
notes may be consolidated and form a single series with the notes of that series issued under this prospectus supplement; provided
that if any such additional notes are not fungible with the notes initially offered hereby for U.S. federal income tax purposes,
such additional notes will have a separate CUSIP number.
Optional Redemption
On and
after August 15, 2020, we may redeem the notes, at our option, at any time in whole or from time to time in part, upon
not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed in percentages of principal amount)
listed below, plus accrued and unpaid interest on the notes, if any, to, but excluding, the applicable redemption date, if redeemed
during the twelve-month period beginning on August 15 of the years indicated below.
Year
|
|
Percentage
|
|
2020
|
|
103.438
|
%
|
2021
|
|
101.719
|
%
|
2022 and thereafter
|
|
|
100.000
|
%
|
At any
time prior to August 15, 2020, we may also redeem the notes, at our option, at any time in whole, or from time to time
in part, at a price equal to the greater of:
|
·
|
100%
of the principal amount of the notes to be redeemed; or
|
|
·
|
the
sum of the present values of the redemption price of the notes to be redeemed if they
were redeemed on August 15, 2020 (as described in the prior paragraph) and all
required interest payments due on such notes through August 15, 2020, exclusive
of interest accrued to the date of redemption, discounted to the date of redemption on
a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the
applicable Treasury Yield plus 50 basis points, plus accrued and unpaid interest, if
any, to, but excluding, the date of redemption.
|
Prior
to August 15, 2020, the Company may on any one or more occasions redeem up to 35% of the original aggregate principal amount
of the notes (calculated after giving effect to any issuance of additional notes) with the Net Cash Proceeds of one or more Equity
Offerings, upon not less than 30 nor more than 60 days’ notice, at a redemption price equal to 106.875% of the principal
amount of the notes, plus accrued and unpaid interest, if any, to, but excluding, the applicable date of redemption;
provided
that
|
(1)
|
at
least 65% of the original aggregate principal amount of the notes (calculated after giving
effect to any issuance of additional notes) remains outstanding after each such redemption;
and
|
|
(2)
|
such
redemption occurs within 90 days after the closing of such Equity Offering.
|
The notes
called for redemption become due on the date fixed for redemption. Notices of redemption will be mailed by first-class mail to
each holder of notes to be redeemed at its registered address or otherwise delivered to each such holder of notes in accordance
with the applicable procedures of DTC, in each case at least 30 but not more than 60 days before the redemption date. The notice
of redemption for the notes will state the amount to be redeemed. On and after the redemption date, interest will cease to accrue
on any notes that are redeemed. If less than all of the notes are redeemed at any time, the trustee will select notes on a pro
rata basis or by any other method the trustee deems fair and appropriate.
For purposes
of determining the optional redemption price, the following definitions are applicable:
“Comparable
Treasury Issue” means the United States Treasury security selected by the Independent Investment Banker as having a maturity
comparable to the period from the redemption date to August 15, 2020 that would be utilized, at the time of selection and
in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity.
“Comparable
Treasury Price” means, with respect to any redemption date, the average of the Reference Treasury Dealer Quotations obtained
by us for that redemption date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations, or, if we
are unable to obtain at least four such Reference Treasury Dealer Quotations, the average of all Reference Treasury Dealer Quotations
obtained by us.
“Independent
Investment Banker” means one of the Reference Treasury Dealers appointed by us from time to time.
“Reference
Treasury Dealer” means each of Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan Securities LLC and Morgan
Stanley & Co. LLC and their respective successors and any other primary U.S. government securities dealer in New York City
(each, a “Primary Treasury Dealer”) selected by the Independent Investment Banker;
provided
,
however
,
that if any of the foregoing shall cease to be a Primary Treasury Dealer, we shall substitute therefor another Primary Treasury
Dealer.
“Reference
Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any redemption date for the notes,
an average, as determined by us, of the bid and asked prices for the Comparable Treasury Issue for the notes, expressed in each
case as a percentage of its principal amount, quoted in writing to the trustee by the Reference Treasury Dealer at 3:30 p.m.,
New York City time, on the third business day preceding the redemption date.
“Treasury
Yield” means, with respect to any redemption date applicable to the notes, the rate per annum equal to the semiannual equivalent
yield to maturity, computed by us as of the third business day immediately preceding the redemption date, of the Comparable Treasury
Issue, assuming a price for the Comparable Treasury Issue, expressed as a percentage of its principal amount, equal to the applicable
Comparable Treasury Price for the redemption date.
Any redemption
may, in the Company’s discretion, be subject to the satisfaction of one or more conditions precedent. If a redemption is
subject to the satisfaction of one or more conditions precedent, the Company may delay the redemption date until such time as
any or all such conditions shall be satisfied, and any related redemption notice may be rescinded in the event that any or all
such conditions shall not have been satisfied by the redemption date, or by the redemption date so delayed.
The notes
will not be entitled to the benefit of any sinking fund. We may at any time and from time to time purchase notes in the open market,
by tender offer, through privately negotiated transactions or otherwise.
Change of Control Offer
If a Change
of Control Repurchase Event occurs, unless the Company has exercised its right to redeem the notes as already described, the Company
will be required to make an offer to each holder of the notes to repurchase all or any part (in excess of $1,000 and in integral
multiples of $1,000) of that holder’s notes at a repurchase price in cash equal to 101% of the aggregate principal amount
of the notes repurchased plus any accrued and unpaid interest on the notes repurchased to, but not including, the date of repurchase.
Within 30 days following any Change of Control Repurchase Event or, at the option of the Company, prior to any Change of Control,
but after the public announcement of the Change of Control, the Company will mail a notice to each holder, with a copy to the
trustee, describing the transaction or transactions that constitute or may constitute the Change of Control Repurchase Event and
offering to repurchase the notes on the payment date specified in the notice, which date will be no earlier than 30 days and no
later than 60 days from the date such notice is mailed. The notice shall, if mailed prior to the date of consummation of the Change
of Control, state that the offer to purchase is conditioned on a Change of Control Repurchase Event occurring on or prior to the
payment date specified in the notice. The Company will comply with the requirements of Rule 14e-1 under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), and any other securities laws and regulations thereunder to the extent
those laws and regulations are applicable in connection with the repurchase of the notes as a result of a Change of Control Repurchase
Event. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control Repurchase
Event provisions of the notes, the Company will comply with the applicable securities laws and regulations and will not be deemed
to have breached its obligations under the Change of Control Repurchase Event provisions of the notes by virtue of such conflict.
On the
repurchase date following a Change of Control Repurchase Event, the Company will, to the extent lawful:
|
(1)
|
accept
for payment all the notes or portions of the notes properly tendered pursuant to its
offer;
|
|
(2)
|
deposit
with the paying agent an amount equal to the aggregate purchase price in respect of all
the notes or portions of the notes properly tendered; and
|
|
(3)
|
deliver
or cause to be delivered to the trustee the notes properly accepted, together with an
officers’ certificate stating the aggregate principal amount of notes being purchased
by the Company.
|
The paying
agent will promptly mail to each holder of notes properly tendered, the purchase price for the notes, and the trustee will promptly
authenticate and mail (or cause to be transferred by book-entry) to each holder a new note equal in principal amount to any unpurchased
portion of any notes surrendered.
The Company
will not be required to make an offer to repurchase the notes upon a Change of Control Repurchase Event if a third party makes
such an offer in the manner, at the times and otherwise in compliance with the requirements for an offer made by the Company and
such third party purchases all notes properly tendered and not withdrawn under its offer.
The Change
of Control Repurchase Event feature of the notes may in certain circumstances make more difficult or discourage a sale or takeover
of the Company and, thus, the removal of incumbent management. The Change of Control Repurchase Event feature is a result of negotiations
between the Company and the underwriters. The Company has no present intention to engage in a transaction involving a Change of
Control, although it is possible that the Company could decide to do so in the future. As contemplated by the definition of Change
of Control, the Company could enter into certain transactions, including acquisitions, refinancings or other recapitalizations,
that would not constitute a Change of Control under the senior indenture, but that could increase the amount of indebtedness outstanding
at such time or otherwise affect the capital structure of the Company or credit ratings of the notes. Restrictions on the ability
of the Company to incur Liens (as defined herein) and enter into sale and leaseback transactions are contained in the covenants
as described following the caption “— Covenants—Limitation on Liens” and “—Covenants—Limitation
on Sale and Leaseback Transactions.” Except for the limitations contained in such covenants and the covenant relating to
repurchases upon the occurrence of a Change of Control Repurchase Event, the senior indenture will not contain any covenants or
provisions that may afford holders of the notes protection in the event of a highly leveraged transaction.
The Company
may not have sufficient funds to repurchase all the notes upon a Change of Control Repurchase Event. Even if it has sufficient
funds, the Company may be prohibited from repurchasing the notes under the terms of its future debt instruments. See “Risk
Factors—Risks Related to an Investment in the Notes— We may not be able to repurchase the notes upon a change of control
repurchase event.”
For purposes
of the foregoing discussion of a repurchase at the option of holders, the following definitions are applicable:
“Change
of Control” shall occur if: (1) any “person” or “group” of related persons (as such terms are used
in Sections 13(d) and 14(d) of the Exchange Act) becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that such person or group shall be deemed to have “beneficial ownership” of all shares that any such person
or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly
or indirectly, of more than 50% of the total voting power of the Voting Stock of the Company or any of its direct or indirect
parent entities (or their successors by merger, consolidation or purchase of all or substantially all of their assets); (2) the
merger or consolidation of the Company with or into another Person or the merger of another Person with or into the Company or
the merger of any Person with or into a Subsidiary of the Company, unless the holders of a majority of the aggregate voting power
of the Voting Stock of the Company, immediately prior to such transaction, hold securities of the surviving or transferee Person
that represent, immediately after such transaction, at least a majority of the aggregate voting power of the Voting Stock of the
surviving or transferee Person; (3) the sale, assignment, conveyance, transfer, lease or other disposition (other than by way
of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company
or any direct or indirect parent entity of the Company and its Subsidiaries taken as a whole to any “person” (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act); or (4) the adoption by the stockholders of the Company or any direct
or indirect parent entity of the Company of a plan or proposal for the liquidation or dissolution of the Company or any such parent
entity.
“Change
of Control Repurchase Event” means the occurrence of both a Change of Control and a Ratings Event.
“Investment
Grade” means a rating of Baa3 or better by Moody’s (or its equivalent under any successor Rating Categories of Moody’s),
a rating of BBB- or better by S&P (or its equivalent under any successor Rating Categories of S&P) and the equivalent
Investment Grade credit rating from any additional Rating Agency or Rating Agencies selected by the Company.
“Moody’s”
means Moody’s Investors Service Inc. and any successor to its rating agency business.
“Rating
Agency” means (1) each of Moody’s and S&P and (2) if either of Moody’s or S&P ceases to rate the notes
or fails to make a rating of the notes publicly available for reasons outside of the control of the Company, a “nationally
recognized statistical rating organization” within the meaning of Section 3(a)(62) under the Exchange Act, selected by the
Company (as certified by a resolution of the board of directors of the Company) as a replacement agency for Moody’s or S&P,
or both, as the case may be.
“Rating
Category” means (i) with respect to S&P, any of the following categories: BBB, BB, B, CCC, CC, C and D (or equivalent
successor categories); (ii) with respect to Moody’s, any of the following categories: Baa, Ba, B, Caa, Ca, C and D (or equivalent
successor categories); and (iii) the equivalent of any such category of S&P or Moody’s used by another Rating Agency.
In determining whether the rating of the notes has decreased by one or more gradations, gradations within Rating Categories (+
and - for S&P; 1, 2 and 3 for Moody’s; or the equivalent gradations for another Rating Agency) shall be taken into account
(e.g., with respect to S&P, a decline in a rating from BB+ to BB, as well as from BB- to B+, will constitute a decrease of
one gradation).
“Rating
Date” means the date that is 60 days prior to the earlier of (i) a Change of Control or (ii) public notice of the occurrence
of a Change of Control or of the intention by the Company to effect a Change of Control.
“Ratings
Event” means the occurrence of the events described in (a) or (b) of this definition on, or within 60 days after the earlier
of, (i) the occurrence of a Change of Control or (ii) public notice of the occurrence of a Change of Control or the intention
by the Company to effect a Change of Control (which period shall be extended so long as the rating of the notes is under publicly
announced consideration for a possible downgrade by any of the Rating Agencies): (a) if the notes are rated by both Rating Agencies
on the Rating Date as Investment Grade, the rating of the notes shall be reduced so that the notes are rated below Investment
Grade by both Rating Agencies, or (b) if the notes are rated below Investment Grade by at least one Rating Agency, the ratings
of the notes by both Rating Agencies shall be decreased by one or more gradations (including gradations within Rating Categories,
as well as between Rating Categories) and the notes are then rated below Investment Grade by both Rating Agencies.
Notwithstanding
the foregoing, a Ratings Event otherwise arising by virtue of a particular reduction in rating shall not be deemed to have occurred
in respect of a particular Change of Control (and thus shall not be deemed a Ratings Event for purposes of the definition of Change
of Control Repurchase Event hereunder) if the Rating Agencies making the reduction in rating to which this definition would otherwise
apply do not announce or publicly confirm or inform the trustee in writing at its request that the reduction was the result, in
whole or in part, of any event or circumstance comprised of or arising as a result of, or in respect of, the applicable Change
of Control (whether or not the applicable Change of Control shall have occurred at the time of the Ratings Event).
“S&P”
means Standard & Poor’s Ratings Group Inc., a division of The McGraw-Hill Companies, Inc., and any successor to its
rating agency business.
“Voting
Stock” of any specified “person” (as that term is used in Section 13(d)(3) of the Exchange Act) as of any date
means the capital stock of such person that is at the time entitled to vote generally in the election of the board of directors
of such person.
Covenants
Except
as described in “—Limitation on Liens” and “—Limitation on Sale and Leaseback Transactions,”
neither the Company nor any of its subsidiaries will be restricted by the senior indenture from:
|
·
|
incurring
any indebtedness or other obligations;
|
|
·
|
paying
dividends or making distributions on the Company’s capital stock or the capital
stock of any of its subsidiaries;
|
|
·
|
purchasing
or redeeming the Company’s capital stock or the capital stock of any of its subsidiaries;
or
|
|
·
|
entering
into transactions with affiliates.
|
In addition,
the Company will not be required to maintain any financial ratios or specified levels of net worth or liquidity or to repurchase
or redeem or otherwise modify the terms of any of the notes upon a change of control or other events involving us or any of our
subsidiaries which may adversely affect the creditworthiness of the Company or the price of the notes, except to the limited extent
described under the caption “—Change of Control Offer.” Among other things, the senior indenture will not contain
covenants designed to afford holders of the notes any protections in the event of a highly leveraged or other transaction involving
the Company that may adversely affect holders of the notes, except to the limited extent described under the caption “—Change
of Control Offer.”
The senior
indenture contains the following principal covenants:
Limitation on
Liens
The Company
will not Incur, and will not permit any of its Subsidiaries to Incur, any Indebtedness secured by a mortgage, security interest,
pledge, lien, charge or other similar encumbrance (collectively, “Liens”) upon (a) any Principal Property of the Company
or any Principal Property of a Subsidiary or (b) any shares of stock or other equity interests or Indebtedness of any Subsidiary
that owns a Principal Property (whether such Principal Property, shares of stock or other equity interests or Indebtedness is
now existing or owned or hereafter created or acquired), in each case, unless prior to or at the same time, the notes (together
with, at the option of the Company, any other Indebtedness of the Company or any Subsidiary ranking equally in right of payment
with the notes) are equally and ratably secured with or, at the option of the Company, prior to, such Indebtedness.
Any Lien
created for the benefit of the holders of the notes pursuant to the preceding sentence shall provide by its terms that such Lien
shall be automatically and unconditionally released and discharged upon the release and discharge of such Lien.
The foregoing
restriction does not apply, with respect to any person, to any of the following:
|
(1)
|
leases
to which such person is a party, or deposits to secure public or statutory obligations
of such person or deposits of cash or United States government bonds to secure surety
or appeal bonds to which such person is a party, or deposits as security for contested
taxes or import duties or for the payment of rent, in each case Incurred in the ordinary
course of business;
|
|
(2)
|
Liens
imposed by law, such as carriers’, warehousemen’s and mechanics’ Liens,
in each case for sums not yet overdue by more than 30 days or being contested in good
faith by appropriate proceedings or other Liens arising out of judgments or awards against
such person with respect to which such person shall then be proceeding with an appeal
or other proceedings for review and Liens arising solely by virtue of any statutory or
common law provision relating to banker’s Liens, rights of set-off or similar rights
and remedies as to deposit accounts or other funds maintained with a creditor depository
institution;
provided
,
however
, that (A) such deposit account is not a
dedicated cash collateral account and is not subject to restrictions against access by
the Company in excess of those set forth by regulations promulgated by the Federal Reserve
Board and (B) such deposit account is not intended by the Company to provide collateral
to DTC;
|
|
(3)
|
Liens
for property taxes not yet subject to penalties for non-payment or which are being contested
in good faith by appropriate proceedings;
|
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(4)
|
minor
survey exceptions, minor encumbrances, easements or reservations of, or rights of others
for, licenses, rights-of-way, sewers, electric lines, telegraph and telephone lines and
other similar purposes, or zoning or other restrictions as to the use of real property
or Liens incidental to the conduct of the business of such person or to the ownership
of its properties which were not Incurred in connection with Indebtedness and which do
not in the aggregate materially adversely affect the value of said properties or materially
impair their use in the operation of the business of such person;
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|
(5)
|
Liens
securing Indebtedness Incurred to finance the construction, purchase or lease of, or
repairs, improvements or additions to, property, plant or equipment of such person;
provided
,
however
, that the Lien may not extend to any other property owned by such person
at the time the Lien is Incurred (other than assets and property affixed or appurtenant
thereto), and the Indebtedness (other than any interest thereon) secured by the Lien
may not be Incurred more than 180 days after the later of the acquisition, completion
of construction, repair, improvement, addition or commencement of full operation of the
property subject to the Lien;
|
|
(6)
|
Liens
existing on the Issue Date;
|
|
(7)
|
Liens
on property or shares of capital stock of another person at the time such other person
becomes a subsidiary of such person;
provided
,
however
, that the Liens
may not extend to any other property owned by such person (other than assets and property
affixed or appurtenant thereto);
|
|
(8)
|
Liens
securing industrial revenue or pollution control bonds issued for the benefit of the
Company;
|
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(9)
|
Liens
on property at the time such person or any of its subsidiaries acquires the property,
including any acquisition by means of a merger or consolidation with or into such person
or a subsidiary of such person;
provided
,
however
, that the Liens may not
extend to any other property owned by such person (other than assets and property affixed
or appurtenant thereto);
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(10)
|
Liens
securing Indebtedness or other obligations of a subsidiary of such person owing to such
person or a wholly-owned subsidiary of such person;
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(11)
|
Liens
to secure any refinancing (or successive refinancings) as a whole, or in part, of any
Indebtedness secured by any Lien referred to in the foregoing clauses (5), (6), (7),
(8) or (9);
provided
,
however
, that: (a) such new Lien shall be limited
to all or part of the same property and assets that secured or, under the written agreements
pursuant to which the original Lien arose, could secure the original Lien (plus improvements
and accessions to, such property or proceeds or distributions thereof); and (b) the Indebtedness
secured by such Lien at such time is not increased to any amount greater than the sum
of (x) the outstanding principal amount or, if greater, committed amount of the Indebtedness
described in clauses (5), (6), (7), (8) or (9) at the time the original Lien became a
Lien permitted under the senior indenture and (y) an amount necessary to pay any fees
and expenses, including premiums, related to such refinancing, refunding, extension,
renewal or replacement; and
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(12)
|
Liens
on assets subject to a sale and leaseback transaction securing Attributable Debt permitted
to be Incurred as described following the caption “—Covenants—Limitation
on Sale and Leaseback Transactions.”
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Notwithstanding
the foregoing restrictions, the Company and its Subsidiaries will be permitted to Incur Indebtedness secured by a Lien which would
otherwise be subject to the foregoing restrictions without equally and ratably securing the notes, if any,
provided
that,
after giving effect to such Indebtedness, the aggregate amount of all Indebtedness secured by Liens (not including Liens permitted
under clauses (1) through (12) above), together with all Attributable Debt outstanding pursuant to the second paragraph of the
“—Limitation on Sale and Leaseback Transactions” covenant, does not exceed 15% of the Consolidated Net Tangible
Assets of the Company calculated as of the date of the creation or Incurrence of the Lien. The Company and its Subsidiaries also
may, without equally and ratably securing the notes, create or Incur Liens that extend, renew, substitute or replace (including
successive extensions, renewals, substitutions or replacements), in whole or in part, any Lien permitted pursuant to the preceding
sentence.
Limitation on
Sale and Leaseback Transactions
The Company
will not directly or indirectly, and will not permit any of its Subsidiaries that own a Principal Property directly or indirectly
to, enter into any sale and leaseback transaction for the sale and leasing back of any Principal Property, whether now owned or
hereafter acquired, unless:
|
(1)
|
such
transaction was entered into prior to the date of issuance of the notes (other than any
additional notes);
|
|
(2)
|
such
transaction was for the sale and leasing back to the Company or one of its Subsidiaries
of any property by the Company or one of its Subsidiaries;
|
|
(3)
|
such
transaction involves a lease for not more than three years (or which may be terminated
by the Company or its Subsidiaries within a period of not more than three years),
|
|
(4)
|
the
Company would be entitled to Incur Indebtedness secured by a Lien with respect to such
sale and leaseback transaction without equally and ratably securing the notes pursuant
to the last paragraph of the “—Limitation on Liens” covenant already
described; or
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|
(5)
|
the
Company applies an amount equal to the net proceeds from the sale of such property to
the purchase of other property or assets used or useful in its business or to the retirement
of long-term Indebtedness within 365 days before or after the effective date of any such
sale and leaseback transaction;
provided
that, in lieu of applying such amount
to the retirement of long-term Indebtedness, the Company may deliver notes of both series
to the trustee for cancellation, such notes to be credited at the cost thereof to it.
|
Notwithstanding
the restrictions set forth in the preceding paragraph, the Company and its Subsidiaries may enter into any sale and leaseback
transaction which would otherwise be subject to the foregoing restrictions, if after giving effect thereto the aggregate amount
of all Attributable Debt with respect to such transactions, together with all Indebtedness outstanding pursuant to the last paragraph
of the “—Limitation on Liens” covenant already described, does not exceed 15% of the Consolidated Net Tangible
Assets of the Company calculated as of the closing date of the sale and leaseback transaction.
Merger, Consolidation
or Sale of Assets
The Company
will not, in a single transaction or through a series of related transactions, consolidate or merge with or into any other person,
or, directly or indirectly, sell or convey substantially all of its assets to another person or group of affiliated persons, except
that the Company may consolidate or merge with, or sell or convey substantially all of its assets to another person if:
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·
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the
Company is the continuing person or the successor person (if other than the Company)
is organized and existing under the laws of the United States of America, any State thereof
or the District of Columbia and such person expressly assumes all obligations of the
Company under the senior indenture, including payment of the principal and interest on
the notes, and the performance and observance of all of the covenants and conditions
of the senior indenture to be performed by the Company; and
|
|
·
|
there
is no default under the senior indenture.
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For purposes
of this covenant only, “substantially all of its assets” means, at any date, a portion of the non-current assets reflected
in the Company’s consolidated balance sheet as of the end of the most recent quarterly period that represents at least 66%
of the total reported value of such assets.
Upon such
a succession, the Company will be relieved from any further obligations under the senior indenture.
Events of Default
The events
of default with respect to the notes will be those events described in “Description of the Debt Securities—Events
of Default” in the accompanying prospectus, except that the following will also be an event of default:
|
(1)
|
a
failure by the Company to repurchase notes of such series tendered for repurchase following
the occurrence of a Change of Control Repurchase Event in conformity with the covenant
set forth following the caption “—Change of Control Offer”;
|
For a
description of the remedies available to holders of the notes as a result of an event of default, see “Description of the
Debt Securities—Events of Default” in the accompanying prospectus.
Definitions
The senior
indenture contains the following defined terms:
“Attributable
Debt” means, with respect to any sale and leaseback transaction, at the time of determination, the lesser of (1) the sale
price of the property so leased multiplied by a fraction the numerator of which is the remaining portion of the base term of the
lease included in such transaction and the denominator of which is the base term of such lease, and (2) the total obligation (discounted
to the present value at the implicit interest factor, determined in accordance with GAAP, included in the rental payments) of
the lessee for rental payments (other than amounts required to be paid on account of property taxes as well as maintenance, repairs,
insurance, water rates and other items which do not constitute payments for property rights) during the remaining portion of the
base term of the lease included in such transaction.
“Common
Stock” means with respect to any Person, any and all shares, interests or other participations in, and other equivalents
(however designated and whether voting or nonvoting) of such Person’s common stock, whether or not outstanding on the Issue
Date, and includes, without limitation, all series and classes of such common stock.
“Consolidated
Net Tangible Assets” means, as of the time of determination, the aggregate amount of the assets of the Company and the assets
of its consolidated subsidiaries after deducting (1) all goodwill, trade names, trademarks, service marks, patents, unamortized
debt discount and expense and other intangible assets and (2) all current liabilities, as reflected on the most recent consolidated
balance sheet prepared by the Company in accordance with GAAP contained in an annual report on Form 10-K or a quarterly report
on Form 10-Q timely filed or any amendment thereto (and not subsequently disclaimed as not being reliable by the Company) pursuant
to the Exchange Act by the Company prior to the time as of which “Consolidated Net Tangible Assets” is being determined.
“Equity
Offering” means a public offering for cash by the Company of its Common Stock, or options, warrants or rights with respect
to its Common Stock, other than (1) public offerings with respect to the Company’s Common Stock, or options, warrants or
rights, registered on Form S-4 or S-8, (2) an issuance to any Subsidiary or (3) any offering of Common Stock issued in connection
with a transaction that constitutes a Change of Control.
“GAAP”
means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board
of the American Standards Board or in such other statements by such other entity as have been approved by a significant segment
of the accounting profession.
“Guarantee”
means any obligation, contingent or otherwise, of any person directly or indirectly guaranteeing any Indebtedness of any other
person and any obligation, direct or indirect, contingent or otherwise, of such person (1) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Indebtedness of such other person (whether arising by virtue of partnership arrangements,
or by agreement to keep well, to purchase assets, goods, securities or services, to take or pay or to maintain financial statement
conditions or otherwise) or (2) entered into for purposes of assuring in any other manner the obligee of such Indebtedness of
the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part);
provided
,
however
,
that the term “guarantee” will not include endorsements for collection or deposit in the ordinary course of business.
The term “guarantee,” when used as a verb, has a correlative meaning.
“Holder”
means the person in whose name a note is registered on the security register books.
“Incur”
means issue, assume, guarantee or otherwise become liable; and the terms “Incurred” and “Incurrence” have
meanings correlative to the foregoing.
“Indebtedness”
means, with respect to any person, obligations of such person for borrowed money (including without limitation, indebtedness for
borrowed money evidenced by notes, bonds, debentures or similar instruments).
“Issue
Date” means August 4, 2017.
“Net
Cash Proceeds,” with respect to any issuance or sale of Common Stock, or options, warrants or rights with respect to its
Common Stock, means the cash proceeds of such issuance or sale, net of attorneys’ fees, accountants’ fees, underwriters’
or placement agents’ fees, listing fees, discounts or commissions and brokerage, consultant and other fees and charges actually
Incurred in connection with such issuance or sale and net of taxes paid or payable as a result of such issuance or sale (after
taking into account any available tax credit or deductions and any tax sharing arrangements).
“Person”
means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or political subdivision thereof.
“Principal
Property” means any domestic blast furnace or steel producing facility, or casters that are part of a plant that includes
such a facility, in each case located in the United States, having a net book value in excess of 1% of Consolidated Net Tangible
Assets at the time of determination.
“Refinance”
means, in respect of any Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue
other Indebtedness in exchange or replacement for, such Indebtedness. “Refinanced” and “Refinancing” shall
have correlative meanings.
“Subsidiary”
means, with respect to any person (the “parent”) at any date, any corporation, limited liability company, partnership,
association or other entity owning a majority of the shares of securities or other interests having ordinary voting power for
the election of directors or another governing body (other than securities or interests having such power only by reason of the
happening of a contingency) are at the time beneficially owned directly or indirectly through one or more intermediaries, or both
by the parent.
Trustee
The Bank
of New York Mellon will be the trustee, security registrar and paying agent for the notes. The Bank of New York Mellon, in each
of its capacities, including without limitation as trustee, security registrar, paying agent and conversion agent, assumes no
responsibility for the accuracy or completeness of the information concerning us or our affiliates or any other party contained
in this document or the related documents or for any failure by us or any other party to disclose events that may have occurred
and may affect the significance or accuracy of such information.
We may
maintain banking relationships in the ordinary course of business with the trustee and its affiliates.
Governing Law
The indenture
provides that it and the notes will be governed by, and construed in accordance with, the laws of the State of New York.
Exchange and Transfer
You may
exchange or transfer the notes in accordance with the senior indenture. You will not be required to pay a service charge to exchange
or transfer the notes, but you may be required to pay for any tax or other governmental charge associated with the exchange or
transfer. The exchange or transfer will only be made if the transfer agent is satisfied with your proof of ownership. See “—Book-Entry
Issuance.”
Paying and Paying Agents
The Bank
of New York Mellon will act as our paying agent for the notes. We may choose to pay interest by mailing checks or making wire
or other electronic funds transfers. Regardless of who acts as the paying agent, all money paid by us to a paying agent that remains
unclaimed at the end of two years after the amount is due to note holders will be repaid to us. After that two-year period, you
may look only to us for payment and not to the trustee, any other paying agent or anyone else. We may also arrange for additional
payment offices, and may cancel or change these offices, including any use of the trustee’s corporate trust office. We may
appoint or change any paying agent without prior notice to any holder.
Book-Entry Issuance
The notes
will be represented by one or more global notes that will be deposited with and registered in the name of The Depository Trust
Company, or DTC, or its nominee. We will not issue certificated notes to you, except in the limited circumstances described below.
Each global note will be issued to DTC, which will keep a computerized record of its participants whose clients have purchased
the notes. Each participant will then keep a record of its own clients. Unless it is exchanged in whole or in part for a certificated
note, a global note may not be transferred. DTC, its nominees and their successors may, however, transfer a global note as a whole
to one another, and these transfers are required to be recorded on our records or a register to be maintained by the trustee.
Beneficial
interests in a global note will be shown on, and transfers of beneficial interests in the global note will be made only through,
records maintained by DTC and its participants. DTC has provided us with the following information: DTC is a limited purpose trust
company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial
Code and a “clearing agency” registered under the provisions of Section 17A of the Exchange Act. DTC holds securities
that its direct participants deposit with DTC. DTC also records the settlements among direct participants of securities transactions,
such as transfers and pledges, in deposited securities through computerized records for direct participants’ accounts. This
book-entry system eliminates the need to exchange certificated securities. Direct participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other organizations.
DTC’s
book-entry system is also used by other organizations such as securities brokers and dealers, banks and trust companies that work
through a direct participant. The rules that apply to DTC and its participants are on file with the SEC.
DTC is
owned by a number of its direct participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the
National Association of Securities Dealers, Inc.
When you
purchase notes through the DTC system, the purchases must be made by or through a direct participant, which will receive credit
for the notes on DTC’s records. When you actually purchase the notes, you will become their beneficial owner. Your ownership
interest will be recorded only on the direct or indirect participants’ records. DTC will have no knowledge of your individual
ownership of the notes. DTC’s records will show only the identity of the direct participants and the principal amount of
the notes held by or through them. You will not receive a written confirmation of your purchase or sale or any periodic account
statement directly from DTC. You should instead receive these from your direct or indirect participant. As a result, the direct
or indirect participants are responsible for keeping accurate account of the holdings of their customers. The trustee will wire
payments on the notes to DTC’s nominee. We and the trustee will treat DTC’s nominee as the owner of each global note
for all purposes. Accordingly, we, the trustee and any paying agent will have no direct responsibility or liability to pay amounts
due on a global note to you or any other beneficial owners in that global note.
We understand
that is DTC’s current practice, upon receipt of any payment of distributions or liquidation amounts, to proportionately
credit direct participants’ accounts on the payment date based on their holdings. In addition, we understand that it is
DTC’s current practice to pass through any consenting or voting rights to such participants by using an omnibus proxy. Those
participants will, in turn, make payments to and solicit votes from you, the ultimate owner of notes, based on their customary
practices. Payments to you will be the responsibility of the participants and not of DTC, the trustee or the Company.
Notes
represented by one or more global notes will be exchangeable for certificated notes with the same terms in authorized denominations
only if:
|
·
|
DTC
is unwilling or unable to continue as a depositary or ceases to be a clearing agency
registered under applicable law, and a successor is not appointed by us within 90 days;
|
|
·
|
an
event of default occurs and is continuing in respect of the notes; or
|
|
·
|
we
decide to discontinue the book-entry system.
|
If a global
note is exchanged for certificated notes, the trustee will keep the registration books for the notes at its corporate office and
follow customary practices and procedures regarding those certificated notes.
CERTAIN
U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following
is a summary of certain material U.S. federal income tax considerations of the acquisition, ownership and disposition of the notes.
This summary is based upon current provisions of the Internal Revenue Code of 1986, as amended (the “Code”), applicable
Treasury regulations, administrative rulings and judicial decisions in effect as of the date of this prospectus supplement, any
of which may subsequently be changed, possibly retroactively, or interpreted differently by the Internal Revenue Service (the
“IRS”) so as to result in U.S. federal income tax consequences different from those discussed below. Except where
noted, this summary deals only with a note held as a capital asset by a beneficial owner who purchases the note on original issuance
at the first price, which we refer to as the “issue price,” at which a substantial portion of the notes are sold for
cash to persons other than bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement
agents or wholesalers. This summary does not address all aspects of U.S. federal income taxes and does not deal with all tax consequences
that may be relevant to holders in light of their personal circumstances or particular situations, such as:
|
·
|
tax
consequences to dealers in securities or currencies, financial institutions, regulated
investment companies, real estate investment trusts, tax-exempt entities, insurance companies
and traders in securities that elect to use a mark-to-market method of accounting for
their securities;
|
|
·
|
tax
consequences to persons holding notes as a part of a hedging, integrated, conversion
or constructive sale transaction or a straddle;
|
|
·
|
tax
consequences to U.S. holders (as defined below) whose “functional currency”
is not the U.S. dollar;
|
|
·
|
tax
consequences to entities treated as partnerships for U.S. federal income tax purposes
and investors therein;
|
|
·
|
tax
consequences to certain former citizens or residents of the United States;
|
|
·
|
alternative
minimum tax consequences, if any;
|
|
·
|
any
state, local or foreign tax consequences; and
|
If an
entity or arrangement that is treated as a partnership for U.S. federal income tax purposes holds notes, the tax treatment of
a partner or member generally will depend upon the status of the partner or member and the activities of the entity or arrangement.
If you are a partner or member in such an entity or arrangement holding the notes, you should consult your tax advisors.
If you are considering
the purchase of notes, you should consult your tax advisors concerning the U.S. federal income tax consequences to you in light
of your own specific situation, as well as consequences arising under the laws of any other taxing jurisdiction.
In this
discussion, we use the term “U.S. holder” to refer to a beneficial owner of notes that is, for U.S. federal income
tax purposes:
|
·
|
an
individual citizen or resident of the United States;
|
|
·
|
a
corporation (or any other entity treated as a corporation for U.S. federal income tax
purposes) created or organized in or under the laws of the United States, any state thereof
or the District of Columbia;
|
|
·
|
an
estate the income of which is subject to U.S. federal income taxation regardless of its
source; or
|
|
·
|
a
trust, if it (1) is subject to the primary supervision of a court within the United States
and one or more U.S. persons have the authority to control all substantial decisions
of the trust, or (2) has a valid election in effect under applicable U.S. Treasury regulations
to be treated as a U.S. person.
|
We use
the term “non-U.S. holder” to describe a beneficial owner of notes that is neither a U.S. holder nor a partnership
or other entity or arrangement that is treated as a partnership for U.S. federal income tax purposes. Non-U.S. holders should
consult their tax advisors to determine the U.S. federal, state, local and other tax consequences that may be relevant to them.
Consequences to U.S.
Holders
Payment of interest
Stated
interest on a note generally will be taxable to a U.S. holder as ordinary income at the time it is received or accrued in accordance
with the U.S. holder’s usual method of accounting for tax purposes.
Sale, redemption
or other taxable disposition of notes
A U.S.
holder generally will recognize gain or loss upon the sale, redemption or other taxable disposition of a note equal to the difference
between the amount realized (less any amounts attributable to accrued stated interest, which will be taxable as such) and the
U.S. holder’s adjusted tax basis in the note. A U.S. holder’s adjusted tax basis in a note generally will be equal
to the amount that such U.S. holder paid for the note. Any gain or loss recognized on a taxable disposition of the note will be
capital gain or loss. If, at the time of the sale, redemption or other taxable disposition of the note, a U.S. holder is treated
as holding the note for more than one year, this capital gain or loss will be long-term capital gain or loss. Otherwise, this
capital gain or loss will be short-term capital gain or loss. In the case of a U.S. holder other than a corporation, including
an individual, long-term capital gains will be subject to tax at a maximum tax rate of 20%. A U.S. holder’s ability to deduct
capital losses may be limited.
Medicare tax on
unearned income
Certain
U.S. holders that are individuals, estates or trusts are required to pay an additional 3.8% tax on, among other things, interest
on and gains from the sale or other disposition of notes. U.S. holders that are individuals, estates or trusts should consult
their tax advisors regarding the effect, if any, of this tax on their ownership and disposition of the notes.
Consequences to Non-U.S.
Holders
Payment of interest
Subject
to the discussion below under “—Foreign Account Tax Compliance Act” and “—Information Reporting
and Backup Withholding,” interest paid to a non-U.S. holder on its notes will not be subject to U.S. federal withholding
tax provided that:
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·
|
such
holder does not actually or constructively own 10% or more of the total combined voting
power of all classes of our voting stock;
|
|
·
|
such
holder is not a controlled foreign corporation with respect to which we are a “related
person” within the meaning of Section 864(d)(4) of the Code;
|
|
·
|
such
holder is not a bank that received such interest on an extension of credit made pursuant
to a loan agreement entered into in the ordinary course of its trade or business; and
|
|
·
|
(1)
the non-U.S. holder certifies in a statement provided to the applicable withholding agent,
under penalties of perjury, that it is not a United States person within the meaning
of the Code and provides its name and address, (2) a securities clearing organization,
bank or other financial institution that holds customers’ securities in the ordinary
course of its trade or business and holds the notes on behalf of the non-U.S. holder
certifies to the applicable withholding agent under penalties of perjury that it, or
the financial institution between it and the non-U.S. holder, has received from the non-U.S.
holder a statement, under penalties of perjury, that such holder is not a United States
person and provides the applicable withholding agent with a copy of such statement or
(3) the non-U.S. holder holds its notes directly through a “qualified intermediary”
and certain conditions are satisfied.
|
A non-U.S.
holder generally will also be exempt from withholding tax on interest if such amount is effectively connected with such holder’s
conduct of a U.S. trade or business (and, if an applicable income tax treaty so requires, is attributable to a U.S. “permanent
establishment”) (as discussed below under “—Consequences to Non-U.S. Holders—U.S. trade or business”)
and the holder provides the applicable withholding agent with a properly executed IRS Form W-8ECI (or applicable successor form).
If a non-U.S.
holder does not satisfy the requirements above, interest paid to such non-U.S. holder generally will be subject to a 30% U.S.
federal withholding tax. Such rate also may be reduced or eliminated under a tax treaty between the United States and the non-U.S.
holder’s country of residence. To claim a reduction or exemption under a tax treaty, a non-U.S. holder must generally complete
an IRS Form W-8BEN or an IRS Form W-8BEN-E (or applicable successor form) and claim the reduction or exemption on the form.
Sale, redemption
or other taxable disposition of notes
Subject
to the discussion below under “—Foreign Account Tax Compliance Act” and “—Information Reporting
and Backup Withholding,” a non-U.S. holder generally will not be subject to U.S. federal income tax or withholding tax on
gain recognized on the sale, redemption or other taxable disposition of a note so long as (1) the gain is not effectively connected
with the conduct by the non-U.S. holder of a trade or business within the United States (or, if an applicable tax treaty so requires,
the gain is not attributable to a U.S. permanent establishment maintained by such non-U.S. holder) and (2) in the case of a non-U.S.
holder who is an individual, such non-U.S. holder is not present in the United States for 183 days or more in the taxable year
of disposition or certain other requirements are not met. A non-U.S. holder that does not meet this exemption is encouraged to
consult his or her tax advisor regarding the potential liability for U.S. federal income tax on such holder’s gain realized
on a note.
U.S. trade or
business
If interest
paid on a note or gain from a disposition of a note is effectively connected with a non-U.S. holder’s conduct of a U.S.
trade or business (and, if an income tax treaty so requires, the non-U.S. holder maintains a U.S. permanent establishment to which
such amounts are generally attributable), the non-U.S. holder generally will be subject to U.S. federal income tax on the interest
or gain on a net basis in the same manner as if it were a U.S. holder. A non-U.S. holder that is a non-U.S. corporation may also
be subject to a branch profits tax equal to 30% of its effectively connected earnings and profits for the taxable year, subject
to certain adjustments, unless it qualifies for a lower rate under an applicable income tax treaty. For this purpose, interest
on a note or gain from a disposition of a note will be included in effectively connected earnings and profits if the interest
or gain is effectively connected with the conduct by the foreign corporation of a trade or business in the United States.
Foreign Account Tax Compliance
Act
Withholding
taxes may be imposed under Sections 1471 to 1474 of the Code (such Sections commonly referred to as the Foreign Account Tax Compliance
Act or “FATCA”) on certain types of payments made to non-United States financial institutions and certain other non-United
States entities. Specifically, a 30% withholding tax may be imposed on payments of interest on, or gross proceeds from the sale
or other disposition of, a note paid to a “foreign financial institution” or a “non-financial foreign entity”
(each as defined in the Code), unless (1) the foreign financial institution undertakes certain diligence and reporting obligations,
(2) the non-financial foreign entity either certifies it does not have any “substantial United States owners” (as
defined in the Code) or furnishes identifying information regarding each substantial United States owner, or (3) the foreign financial
institution or non-financial foreign entity otherwise qualifies for an exemption from these rules. If the payee is a foreign financial
institution and is subject to the diligence and reporting requirements in (1) above, it must enter into an agreement with the
United States Department of the Treasury requiring, among other things, that it undertake to identify accounts held by certain
“specified United States persons” or “United States owned foreign entities” (each as defined in the Code),
annually report certain information about such accounts, and withhold 30% on certain payments to non-compliant foreign financial
institutions and certain other account holders. An intergovernmental agreement governing FATCA between the United States and an
applicable foreign country may modify the requirements described in this paragraph.
Under
applicable U.S. Treasury regulations, withholding under FATCA generally will apply to payments of interest on a note. Withholding
on withholdable payments of gross proceeds begins on January 1, 2019.
Prospective
investors should consult their tax advisors regarding the potential application of withholding under FATCA to their investment
in the notes.
Information Reporting
and Backup Withholding
U.S. holders
Payments
to a U.S. holder of interest on a note, or proceeds from the sale or other disposition of a note by a U.S. holder, are generally
subject to information reporting unless the U.S. holder is an exempt recipient (such as a corporation). Such payments may also
be subject to backup withholding tax if such U.S. holder fails to supply a taxpayer identification number, certified under penalties
of perjury, as well as certain other information or otherwise fails to establish an exemption from backup withholding or if the
U.S. holder fails to report in full dividend and interest income. Any amounts withheld under the backup withholding rules will
be allowed as a refund or credit against that U.S. holder’s U.S. federal income tax liability provided the required information
is timely furnished to the IRS.
Non-U.S. holders
In general,
a non-U.S. holder will not be subject to backup withholding with respect to payments of interest on the notes provided that the
applicable withholding agent does not have actual knowledge or reason to know that such non-U.S. holder is a United States person
as defined under the Code, and such withholding agent has received from the non-U.S. holder the required certification that it
is a non-U.S. holder. Generally, the name and address of the beneficial owner and the amount of interest paid on a note, as well
as the amount, if any, of tax withheld, will be reported to the IRS.
Information
reporting and, depending on the circumstances, backup withholding will apply to the proceeds of a sale or other disposition (including
a retirement or redemption) of notes by a non-U.S. holder within the United States or conducted through certain United States-related
financial intermediaries, unless the non-U.S. holder certifies to the payor under penalties of perjury that it is a non-U.S. holder
(and the payor does not have actual knowledge or reason to know that such non-U.S. holder is a United States person as defined
under the Code), or such non-U.S. holder otherwise establishes an exemption.
Any amounts
withheld under the backup withholding rules will be allowed as a refund or a credit against a non-U.S. holder’s U.S. federal
income tax liability provided the required information is timely furnished to the IRS.
CERTAIN
ERISA CONSIDERATIONS
The U.S. Employee
Retirement Income Security Act of 1974, as amended (“ERISA”), imposes certain requirements on “employee benefit
plans” (as defined in Section 3(3) of ERISA) subject to Title I of ERISA, including entities such as collective investment
funds and separate accounts whose underlying assets include the assets of such plans (collectively, “ERISA Plans”)
and on those persons who are fiduciaries with respect to ERISA Plans. Investments by ERISA Plans are subject to ERISA’s
general fiduciary requirements, including the requirement of investment prudence and diversification and the requirement that
an ERISA Plan’s investments be made in accordance with the documents governing the ERISA Plan. The prudence of a particular
investment must be determined by the responsible fiduciary of an ERISA Plan by taking into account the ERISA Plan’s particular
circumstances and all of the facts and circumstances of the investment including, but not limited to, the matters discussed above
under “Risk Factors” and the fact that in the future there may be no market in which such fiduciary will be able to
sell or otherwise dispose of any notes it may purchase.
Section
406 of ERISA and Section 4975 of the Code prohibit certain transactions involving the assets of an ERISA Plan (as well as those
plans that are not subject to ERISA but to which Section 4975 of the Code applies, such as individual retirement accounts and
Keogh plans, including entities whose underlying assets include the assets of such plans (collectively, together with ERISA Plans,
“Plans”)) and certain persons (referred to as “parties in interest” or “disqualified persons”)
having certain relationships to such Plans, unless a statutory or administrative exemption is applicable to the transaction (each
a “prohibited transaction”). A party in interest or disqualified person who engages in a prohibited transaction may
be subject to excise taxes and other penalties and liabilities under ERISA and the Code.
Governmental
plans (as defined in Section 3(32) of ERISA), non-U.S. plans (as defined in Section 4(b)(4) of ERISA) and certain church plans
(as defined in Section 3(33) of ERISA), while not subject to the fiduciary responsibility provisions of ERISA or the provisions
of Section 4975 of the Code, may nevertheless be subject to non-U.S., federal, state, local or other applicable laws that are
substantially similar to the foregoing provisions of ERISA and the Code (“Similar Laws”). Fiduciaries of any such
plans should consult with their counsel before purchasing any notes.
Prohibited
Transaction Issues
Section
406 of ERISA and Section 4975 of the Code prohibit Plans from engaging in specified transactions involving plan assets with persons
or entities who are “parties in interest,” within the meaning of ERISA, or “disqualified persons,” within
the meaning of Section 4975 of the Code, unless an exemption is available. A party in interest or disqualified person who engaged
in a non-exempt prohibited transaction may be subject to excise taxes and other penalties and liabilities under ERISA and the
Code. In addition, the fiduciary of the Plan that engaged in such a non-exempt prohibited transaction may be subject to penalties
and liabilities under ERISA and the Code. The acquisition and/or holding of notes by a Plan with respect to which we or the underwriters
are considered a party in interest or a disqualified person may constitute or result in a direct or indirect prohibited transaction
under Section 406 of ERISA and/or Section 4975 of the Code, unless the investment is acquired and is held in accordance with an
applicable statutory, class or individual prohibited transaction exemption. In this regard, the U.S. Department of Labor (the
“DOL”) has issued prohibited transaction class exemptions, or “PTCEs,” that may apply to the acquisition
and holding of the notes by a Plan. The class exemptions which the DOL has issued include, without limitation, PTCE 84-14 respecting
transactions determined by independent qualified professional asset managers, PTCE 90-1 respecting insurance company pooled separate
accounts, PTCE 91-38 respecting bank collective investment funds, PTCE 95-60 respecting life insurance company general accounts
and PTCE 96-23 respecting transactions determined by in-house asset managers. In addition, Section 408(b)(17) of ERISA and Section
4975(d)(20) of the Code provide relief from the prohibited transaction provisions of ERISA and Section 4975 of the Code for certain
transactions, provided that the applicable party in interest does not (directly or indirectly) have or exercise any discretionary
authority or control or render any investment advice with respect to the assets of any Plan involved in the transaction and provided
further that the Plan pays no more than adequate consideration in connection with the transaction. Each of the above-noted exemptions
contains conditions and limitations on its application. Fiduciaries of Plans considering acquiring and/or holding the notes in
reliance on these or any other exemption should carefully review the exemption to assure it is applicable. There can be no assurance
that all of the conditions of any such exemptions will be satisfied.
Because
of the foregoing, the notes may not be purchased or held by any person investing “plan assets” of any Plan, unless
such purchase and holding will not constitute a non-exempt prohibited transaction under ERISA and the Code or similar violation
of any applicable Similar Laws.
The foregoing
discussion is general in nature and is not intended to be all inclusive. Due to the complexity of these rules and the penalties
that may be imposed upon persons involved in nonexempt prohibited transactions, it is particularly important that fiduciaries,
or other persons considering purchasing the notes on behalf of, or with the assets of, any Plan, consult with their counsel regarding
the potential applicability of ERISA, Section 4975 of the Code and any Similar Laws to such investment and whether an exemption
would be applicable to the purchase and holding of the notes.
Representations
By acceptance
of a note, each purchaser and subsequent transferee of a note will be deemed to have represented and warranted that either (i)
no portion of the assets used by such purchaser or transferee to acquire and hold the notes constitutes assets of any Plan or
(ii) the purchase and holding of the notes by such purchaser or transferee will not constitute a non-exempt prohibited transaction
under Section 406 of ERISA or Section 4975 of the Code or a similar violation under any applicable Similar Laws.
Additionally,
if any purchaser or subsequent transferee of a note is using assets of a Plan to acquire and hold the notes, such purchaser or
subsequent transferee will be deemed to have represented and warranted that (i) none of the Company, the underwriters or any of
their respective affiliates has acted as the Plan’s fiduciary, or has been relied upon for any advice, with respect to the
purchaser or transferee’s decision to acquire and hold the notes and none of the Company, the underwriters or any of their
respective affiliates shall at any time be relied upon as the Plan’s fiduciary with respect to any decision to acquire,
continue to hold or transfer the notes and (ii) the decision to invest in the notes has been made at the recommendation or direction
of an “independent fiduciary” (“Independent Fiduciary”) within the meaning of U.S. Code of Federal Regulations
29 C.F.R. Section 2510.3-21(c), as amended (the “Fiduciary Rule”), who (a) is independent of the Company and the underwriters;
(b) is capable of evaluating investment risks independently, both in general and with respect to particular transactions and investment
strategies (within the meaning of the Fiduciary Rule); (c) is a fiduciary (under ERISA and/or Section 4975 of the Code) with respect
to the purchaser or transferee’s investment in the notes and is responsible for exercising independent judgment in evaluating
the investment in the notes; (d) is either (A) a bank as defined in Section 202 of the Investment Advisers Act of 1940, as amended
(the “Advisers Act”) or similar institution that is regulated and supervised and subject to periodic examination by
a state or federal agency of the United States; (B) an insurance carrier which is qualified under the laws of more than one state
of the United States to perform the services of managing, acquiring or disposing of assets of such a Plan; (C) an investment adviser
registered under the Advisers Act or, if not registered as an investment adviser under the Advisers Act by reason of paragraph
(1) of Section 203A of the Advisers Act, is registered as an investment adviser under the laws of the state (referred to in such
paragraph (1)) in which it maintains its principal office and place of business; (D) a broker dealer registered under the Exchange
Act; and/or (E) an Independent Fiduciary (not described in clauses (A), (B), (C) or (D) above) that holds or has under management
or control total assets of at least $50 million, and will at all times that such purchaser or transferee holds the notes hold
or have under management or control, total assets of at least $50 million; and (e) is aware of and acknowledges that (I) none
of the Company, the underwriters or any of their respective affiliates is undertaking to provide impartial investment advice,
or to give advice in a fiduciary capacity, in connection with the purchaser’s or transferee’s investment in the notes,
and (II) the Company, the underwriters and their respective affiliates have a financial interest in the purchaser’s or transferee’s
investment in the notes on account of the proceeds, fees and other remuneration they expect to receive in connection with transactions
contemplated hereunder. Individual retirement accounts will be deemed to have made all of the representations and warranties in
this paragraph except for those in clause (d).
It is
understood and agreed, and by acquiring a note or any interest therein each person acting on behalf of a Plan (or any other plan
subject to Similar Laws) to make such acquisition, that none of the transaction parties or other persons that provide marketing
services, nor any of their affiliates, has provided or is providing investment advice of any kind whatsoever (whether impartial
or otherwise) or is giving any advice in a fiduciary or other capacity, in connection with the plan’s acquisition of a note
or any interest therein.
UNDERWRITING
Merrill
Lynch, Pierce, Fenner & Smith Incorporated is acting as representative of each of the underwriters named below. Subject to
the terms and conditions set forth in a firm commitment underwriting agreement among us and the underwriters, we have agreed to
sell to the underwriters, and each of the underwriters has agreed, severally and not jointly, to purchase from us, the principal
amount of notes set forth opposite its name below.
Underwriter
|
|
Principal
Amount of
Notes
|
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
|
|
$
|
187,500,000
|
|
J.P. Morgan Securities LLC
|
|
$
|
67,500,000
|
|
Barclays Capital Inc.
|
|
$
|
48,750,000
|
|
Morgan Stanley & Co. LLC
|
|
$
|
48,750,000
|
|
PNC Capital Markets LLC
|
|
$
|
48,750,000
|
|
Wells Fargo Securities, LLC
|
|
$
|
48,750,000
|
|
Goldman Sachs & Co. LLC
|
|
$
|
26,250,000
|
|
BMO Capital Markets Corp.
|
|
$
|
31,875,000
|
|
Commerz Markets LLC
|
|
$
|
31,875,000
|
|
Scotia Capital (USA) Inc.
|
|
$
|
31,875,000
|
|
SunTrust Robinson Humphrey, Inc.
|
|
$
|
31,875,000
|
|
Citigroup Global Markets Inc.
|
|
$
|
22,500,000
|
|
ING Financial Markets LLC
|
|
$
|
22,500,000
|
|
SG Americas Securities, LLC
|
|
$
|
22,500,000
|
|
BNY Mellon Capital Markets, LLC
|
|
$
|
13,125,000
|
|
Citizens Capital Markets, Inc.
|
|
$
|
13,125,000
|
|
Credit Suisse Securities (USA) LLC
|
|
$
|
13,125,000
|
|
The Huntington Investment Company
|
|
$
|
13,125,000
|
|
RBC Capital Markets, LLC
|
|
$
|
13,125,000
|
|
U.S. Bancorp Investments, Inc.
|
|
$
|
13,125,000
|
|
Total
|
|
$
|
750,000,000
|
|
Subject
to the terms and conditions set forth in the underwriting agreement, the underwriters have agreed, severally and not jointly,
to purchase all of the notes sold under the underwriting agreement if any of these notes are purchased. If an underwriter defaults,
the underwriting agreement provides that the purchase commitments of the nondefaulting underwriters may be increased or the underwriting
agreement may be terminated.
We have
agreed to indemnify the several underwriters and their controlling persons against certain liabilities in connection with this
offering, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make
in respect of those liabilities.
The underwriters
are offering the notes, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters
by their counsel, including the validity of the notes, and other conditions contained in the underwriting agreement, such as the
receipt by the underwriters of officer’s certificates and legal opinions. The underwriters reserve the right to withdraw,
cancel or modify offers to the public and to reject orders in whole or in part.
Commissions and Discounts
The representative
has advised us that the underwriters propose initially to offer the notes to the public at the public offering price set forth
on the cover page of this prospectus supplement and to certain dealers at such price less a concession not in excess of 0.375%
of the principal amount of the notes. After the initial offering, the public offering price, concession or any other term of the
offering may be changed. Sales of the notes made outside of the United States may be made by affiliates of the underwriters.
The expenses
of the offering, not including the underwriting discount, are estimated at $2 million and are payable by us.
New Issue of Notes
The notes
are a new issue of securities with no established trading market. We do not intend to apply for listing of the notes on any national
securities exchange or for inclusion of the notes on any automated dealer quotation system. We have been advised by certain
of the underwriters that they presently intend to make a market in the notes after completion of the offering. However, they
are under no obligation to do so and may discontinue any market-making activities at any time without any notice. We cannot assure
the liquidity of the trading market for the notes or that an active public market for the notes will develop. If an active public
trading market for the notes does not develop, the market price and liquidity of the notes may be adversely affected. If the notes
are traded, they may trade at a discount from their initial offering price, depending on prevailing interest rates, the market
for similar securities, our operating performance and financial condition, general economic conditions and other factors.
No Sales of Similar Securities
We have
agreed that we will not, for a period of 30 days after the date of this prospectus supplement, without first obtaining the prior
written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated, offer, sell, contract to sell or otherwise dispose
of, any debt securities issued or guaranteed by us and having a term of more than one year, except for the notes sold to the underwriters
pursuant to the underwriting agreement.
Short Positions
In connection
with the offering, the underwriters may purchase and sell the notes in the open market. These transactions may include short sales
and purchases on the open market to cover positions created by short sales. Short sales involve the sale by the underwriters of
a greater principal amount of notes than they are required to purchase in the offering. The underwriters must close out any short
position by purchasing notes in the open market. A short position is more likely to be created if the underwriters are concerned
that there may be downward pressure on the price of the notes in the open market after pricing that could adversely affect investors
who purchase in the offering.
Similar
to other purchase transactions, the underwriters’ purchases to cover the syndicate short sales may have the effect of raising
or maintaining the market price of the notes or preventing or retarding a decline in the market price of the notes. As a result,
the price of the notes may be higher than the price that might otherwise exist in the open market.
The underwriters
may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased notes sold by or for the account of such underwriter in stabilizing
or short covering transactions.
Neither
we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the notes. In addition, neither we nor any of the underwriters make any representation
that the representative will engage in these transactions or that these transactions, once commenced, will not be discontinued
without notice.
Other Relationships
Some of
the underwriters and their affiliates have engaged in, and may in the future engage in, investment banking and other commercial
dealings in the ordinary course of business with us or our affiliates. They have received, or may in the future receive, customary
fees and commissions for these transactions. In particular, JPMorgan Chase Bank, N.A., an affiliate of J.P. Morgan Securities
LLC, acts as the administrative agent and collateral agent under our ABL Credit Agreement. In addition, affiliates of certain
of the underwriters are lenders under our ABL Credit Agreement. Certain of the underwriters and/or their affiliates may hold a
portion of our 7.00% Senior Notes due 2018, 6.875% Senior Notes due 2021 or 7.50% Senior Notes due 2022. Accordingly, such underwriters
and/or their affiliates will receive a portion of the proceeds from this offering upon the redemption of such notes. Bank of America,
N.A., an affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated, is administrative agent under a credit facility
of our USS POSCO Industries joint venture.
In addition,
in the ordinary course of their business activities, the underwriters and their affiliates may make or hold a broad array of investments
and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans)
for their own account and for the accounts of their customers. Such investments and securities activities may involve securities
and/or instruments of ours or our affiliates. Certain of the underwriters or their affiliates that have a lending relationship
with us routinely hedge, and certain other of those underwriters or their affiliates currently hedge and are likely to hedge in
the future, their credit exposure to us consistent with their customary risk management policies. Typically, such underwriters
and their affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default
swaps or the creation of short positions in our securities, including potentially the notes offered hereby. Any such credit default
swaps or short positions could adversely affect future trading prices of the notes offered hereby. The underwriters and their
affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities
or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities
and instruments.
European Economic Area
In relation
to each member state of the European Economic Area, no offer of notes which are the subject of the offering has been, or will
be made to the public in that Member State, other than under the following exemptions under the Prospectus Directive:
|
·
|
to
any legal entity which is a qualified investor as defined in the Prospectus Directive;
|
|
·
|
to
fewer than 150 natural or legal persons (other than qualified investors as defined in
the Prospectus Directive), subject to obtaining the prior consent of the Representative
for any such offer; or
|
|
·
|
in
any other circumstances falling within Article 3(2) of the Prospectus Directive,
|
provided
that no such offer of notes referred to in (a) to (c) above shall result in a requirement for the Company or the Representative
to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of
the Prospectus Directive.
This prospectus
has been prepared on the basis that any offer of notes in any Member State will be made pursuant to an exemption under the Prospectus
Directive from the requirement to publish a prospectus for offers of notes. Accordingly, any person making or intending to make
an offer in that Relevant Member State of notes which are the subject of the offering contemplated in this prospectus may only
do so in circumstances in which no obligation arises for the Company or the Representative to publish a prospectus pursuant to
Article 3 of the Prospectus Directive in relation to such offer. Neither the Company nor the Representative has authorized, nor
do they authorize, the making of any offer of notes in circumstances in which an obligation arises for the Company or the Representative
to publish a prospectus for such offer.
For the
purpose of this provision, the expression an “offer of notes to the public” in relation to any notes in any Member
State means the communication in any form and by any means of sufficient information on the terms of the offer and the notes to
be offered so as to enable an investor to decide to purchase or subscribe the notes, as the same may be varied in that Member
State by any measure implementing the Prospectus Directive in that Member State and the expression “Prospectus Directive”
means Directive 2003/71/EC (as amended) and includes any relevant implementing measure in the each Member State.
The above
selling restriction is in addition to any other selling restriction set out below.
Notice to Prospective
Investors in the United Kingdom
In addition,
in the United Kingdom, this document is being distributed only to, and is directed only at, and any offer subsequently made may
only be directed at persons who are “qualified investors” (as defined in the Prospectus Directive) (i) who have professional
experience in matters relating to investments falling within Article 19 (5) of the Financial Services and Markets Act 2000 (Financial
Promotion) Order 2005, as amended (the “Order”) and/or (ii) who are high net worth companies (or persons to whom it
may otherwise be lawfully communicated) falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred
to as “relevant persons”). This document must not be acted on or relied on in the United Kingdom by persons who are
not relevant persons. In the United Kingdom, any investment or investment activity to which this document relates is only available
to, and will be engaged in with, relevant persons.
Notice to Prospective
Investors in Switzerland
This prospectus
supplement does not constitute an issue prospectus pursuant to Article 652a or Article 1156 of the Swiss Code of Obligations and
the notes will not be listed on the SIX Swiss Exchange. Therefore, this prospectus supplement may not comply with the disclosure
standards of the listing rules (including any additional listing rules or prospectus schemes) of the SIX Swiss Exchange. Accordingly,
the notes may not be offered to the public in or from Switzerland, but only to a selected and limited circle of investors who
do not subscribe to the notes with a view to distribution. Any such investors will be individually approached by the underwriters
from time to time.
Notice to Prospective
Investors in the Dubai International Financial Centre
This prospectus
supplement relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority
(“DFSA”). This prospectus supplement is intended for distribution only to persons of a type specified in the Offered
Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for
reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus supplement nor
taken steps to verify the information set forth herein and has no responsibility for the prospectus supplement. The notes to which
this prospectus supplement relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the
notes offered should conduct their own due diligence on the notes. If you do not understand the contents of this prospectus supplement
you should consult an authorized financial advisor.
Notice to Prospective
Investors in Canada
The notes
may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined
in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients,
as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale
of the notes must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements
of applicable securities laws.
Securities
legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this
prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages
are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province
or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province
or territory for particulars of these rights or consult with a legal advisor.
Pursuant
to section 3A.3 (or, in the case of securities issued or guaranteed by the government of a non-Canadian jurisdiction, section
3A.4) of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure
requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
LEGAL
MATTERS
DLA Piper
LLP (US), New York, New York, will pass upon certain legal matters for us in connection with the issuance of the notes. Simpson
Thacher & Bartlett LLP, New York, New York, will pass upon the validity of the notes for the underwriters.
EXPERTS
The financial
statements and management’s assessment of the effectiveness of internal control over financial reporting (which is included
in Management’s Report to Stockholders – Internal Control over Financial Reporting) incorporated in this prospectus
supplement by reference to the Annual Report on Form 10-K for the year ended December 31, 2016 have been so incorporated in reliance
on the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said
firm as experts in auditing and accounting.
Prospectus
United States Steel Corporation
Senior Debt Securities
Subordinated Debt Securities
Common Stock
Preferred Stock
Depositary Shares
Warrants
Stock Purchase Contracts
Stock Purchase Units
We may from time to time offer and sell
senior debt securities, subordinated debt securities, common stock, preferred stock, depositary shares, warrants, stock purchase
contracts, stock purchase units or any combination of these securities. The debt securities, preferred stock, warrants and purchase
contracts may be convertible into or exercisable or exchangeable for common or preferred stock or other securities or debt or equity
securities of one or more other entities.
We may offer and sell these securities
to or through one or more underwriters, dealers or agents, directly to other purchasers, on a continuous or delayed basis, or to
holders of other securities in exchanges in connection with acquisitions.
This prospectus describes some of the
general terms that may apply to these securities. The specific terms of any securities to be offered will be described in a supplement
to this prospectus. You should read this prospectus and any prospectus supplement carefully before you invest.
Our common stock is listed on the New
York Stock Exchange under the symbol “X.”
Investing in these securities involves
certain risks. See “Risk Factors” on page 3 and the other information included and incorporated by reference
in this prospectus for a discussion of the factors you should carefully consider before deciding to purchase these securities.
Neither the Securities and Exchange
Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal offense.
If you are in a jurisdiction where
offers to sell, or solicitations of offers to purchase, the securities offered by this document are unlawful, or if you are a person
to whom it is unlawful to direct these types of activities, then the offer presented in this document does not extend to you. The
information contained in this document speaks only as of the date of this document, unless the information specifically indicates
that another date applies.
The date of this Prospectus is March
3, 2016.
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS
This prospectus is a part of a “shelf”
registration statement that we have filed with the Securities and Exchange Commission (the “SEC”). By using a shelf
registration statement, we may offer and sell, at any time or from time to time, in one or more offerings, any combination of the
securities described in this prospectus. The exhibits to our registration statement contain the full text of certain contracts
and other important documents we have summarized in this prospectus. Since these summaries may not contain all the information
that you may find important in deciding whether to purchase the securities we offer, you should review the full text of these documents.
The registration statement and the exhibits can be obtained from the SEC as indicated under the heading “Where You Can Find
More Information.”
This prospectus only provides you with
a general description of the securities we may offer. Each time we sell securities, we will provide you with a prospectus supplement
that contains specific information about the terms of those securities, including, where applicable, the following:
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The type and amount of securities that we propose to sell;
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The initial public offering price of the securities;
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The names of any underwriters or agents through or to which we will sell the securities;
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The compensation of those underwriters or agents; and
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Information about any securities exchanges or automated quotation systems on which the securities will be listed or traded.
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The prospectus supplement and any “free
writing prospectus” that we authorize to be delivered to you may also add, update or change information contained in this
prospectus. You should read this prospectus, the prospectus supplement and any free writing prospectus together with the additional
information described below under the heading “Where You Can Find More Information.”
Whenever references are made in this
prospectus to information that will be included in a prospectus supplement, to the extent permitted by applicable law, rules or
regulations, we may instead include such information or add, update or change the information contained in this prospectus by means
of a free writing prospectus, post-effective amendment to the registration statement of which this prospectus is a part, through
filings we make with the SEC that are incorporated by reference into this prospectus or by any other method as may be then permitted
under applicable laws, rules or regulations.
WHERE YOU CAN FIND MORE INFORMATION
United States Steel Corporation files
annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any document
we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information
on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our SEC filings are also accessible through
the Internet at the SEC’s website at http://www.sec.gov. Many of our SEC filings are also accessible on our website at
http://www.ussteel.com
.
The reference to our website is intended to be an inactive textual reference only. The information on or connected to our website
is not a part of this prospectus or the accompanying prospectus supplement and is not incorporated into this prospectus or any
prospectus supplement.
INCORPORATION OF CERTAIN INFORMATION BY
REFERENCE
The SEC allows us to “incorporate by reference”
into this prospectus the information in documents we file with it, which means that we can disclose important information to you
by referring you to those documents. The information incorporated by reference is considered to be a part of this prospectus,
and later information that we file with the SEC will update and supersede this information. We incorporate by reference the following
documents and any future filings we make with the SEC under Section 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act
of 1934 until the termination of the offering (other than any documents or information deemed to have been furnished and not
filed in accordance with the SEC rules). These documents contain important information about us. The SEC file number for these
documents is 1-16811.
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Our Annual Report
on Form 10-K for the year ended December 31, 2015;
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Our Definitive
Proxy Statement on Schedule 14A, dated March 13, 2015; and
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The description
of our common stock contained in our registration statement on Form S-4 filed with the
SEC on September 7, 2001, as amended.
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Any statement contained in a document
incorporated by reference to this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the
extent that a statement contained herein modifies or supersedes such statement. Any such statement so modified or superseded will
not be deemed to constitute a part of this prospectus except as so modified or superseded.
Any statement contained in a document incorporated by reference
into this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement
contained herein or in any other subsequently filed document which is also incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded will not be deemed to constitute a part of this prospectus except
as so modified or superseded.
We will provide, upon written or oral
request, to each person to whom a prospectus is delivered, including any beneficial owner, a copy of any or all of the information
that has been incorporated by reference into the prospectus but not delivered with the prospectus. You may request a copy of these
filings at no cost.
Requests for documents should be directed
to:
United States Steel Corporation
Office of the Secretary
600 Grant Street
Pittsburgh, Pennsylvania 15219-2800
(412) 433-1121
(412) 433-2811 (fax)
FORWARD-LOOKING STATEMENTS
This prospectus and the information incorporated
by reference in it contain information that may constitute “forward-looking statements” within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend the
forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in these sections.
Generally, we have identified such forward-looking
statements by using the words “believe,” “expect,” “intend,” “estimate,” “anticipate,”
“project,” “target”, “forecast”, “aim,” “will” and similar expressions
or by using future dates in connection with any discussion of, among other things, operating performance, trends, events or developments
that we expect or anticipate will occur in the future, statements relating to volume growth, share of sales and earnings per share
growth, and statements expressing general views about future operating results. However, the absence of these words or similar
expressions does not mean that a statement is not forward-looking. Forward-looking statements are not historical facts, but instead
represent only the Company’s beliefs regarding future events, many of which, by their nature, are inherently uncertain and
outside of the Company’s control. It is possible that the Company’s actual results and financial condition may differ,
possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Management
believes that these forward-looking statements are reasonable as of the time made. However, caution should be taken not to place
undue reliance on any such forward-looking statements because such statements speak only as of the date when made. Our Company
undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from our Company’s historical experience and our present
expectations or projections. These risks and uncertainties include, but are not limited to the risks and uncertainties described
in this prospectus and in the information incorporated herein by reference, including in “Item 1A. Risk Factors”
in our Annual Report on Form 10-K for the year ended December 31, 2015, and those described from time to time in
our future reports filed with the Securities and Exchange Commission that are incorporated herein by reference.
THE COMPANY
United States Steel Corporation (U. S. Steel)
is an integrated steel producer of flat-rolled and tubular products with major production operations in North America and Europe.
An integrated steel producer uses iron ore and coke as primary raw materials for steel production. U. S. Steel has annual
raw steel production capability of 22 million net tons (17 million tons in the United States and 5 million tons
in Europe). U. S. Steel is also engaged in other business activities consisting primarily of railroad services and real
estate operations.
United States Steel Corporation is a Delaware
corporation. U. S. Steel’s principal executive offices are located at 600 Grant Street, Pittsburgh, PA 15219-2800, and its telephone
number is (412) 433-1121. For more information about U. S. Steel, see “Where you can find more information about U. S. Steel”.
References in this prospectus to the
“Registrant,” “Company,” “United States Steel,” “U. S. Steel,” “U. S. Steel,”
“we,” “us” and “our” are to United States Steel Corporation and its subsidiaries.
RISK FACTORS
Investing in our securities involves
risks. See the risk factors described in our Annual Report on Form 10-K for our most recent fiscal year, which is incorporated
by reference in this prospectus, in any applicable prospectus supplement and any risk factors set forth in our other filings with
the SEC, pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act. Before making an investment decision, you
should carefully consider these risks as well as other information we include or incorporate by reference in this prospectus.
These risks could materially affect our business, results of operations or financial condition and cause the value of our securities
to decline. You could lose all or part of your investment.
RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
Continuing Operations
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Year
Ended December 31,
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2015
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2
014
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2013
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2012
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2011
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2010
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Ratio of earnings to fixed charges(a)
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(b)
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1.07
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(c)
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(d)
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(e)
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(f)
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Ratio of earnings to combined fixed charges and preference
dividends(g)
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(b)
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1.07
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(c)
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(d)
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(e)
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(f)
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(a)
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For the purposes of calculating the ratio of earnings to fixed
charges, “earnings” are defined as income from continuing operations before
income taxes and before adjustment for noncontrolling interests in consolidated subsidiaries
or income (loss) from equity investees, less capitalized interest, plus fixed charges,
and distributions from equity investees. “Fixed charges” consist of interest,
whether expensed or capitalized, on all indebtedness, amortization of premiums, discounts
and capitalized expenses related to indebtedness, and an interest component equal to
one-third of rental expense, representing the portion of rental expense that management
believes is attributable to interest.
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(b)
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Earnings were not sufficient to cover fixed charges by $1,500
million for the year ended December 31, 2015.
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(c)
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Earnings were not sufficient to cover fixed charges by $2,278 million for the year ended December 31, 2013.
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(d)
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Earnings were not sufficient to cover fixed charges by $80 million for the year ended December 31, 2012.
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Earnings were not sufficient to cover fixed charges by $64 million for the year ended December 31, 2011.
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Earnings were not sufficient to cover fixed charges by $415 million for the year ended December 31, 2010.
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(g)
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For the purposes of calculating the ratio of earnings to combined fixed charges and preference dividends, “earnings”
are defined as income from continuing operations before income taxes and before adjustment for noncontrolling interests
in consolidated subsidiaries or income (loss) from equity investees, less capitalized interest, plus fixed charges,
and distributions from equity investees. “Fixed charges” consist of interest, whether expensed or capitalized,
on all indebtedness, amortization of premiums, discounts and capitalized expenses related to indebtedness, an interest
component equal to one-third of rental expense, representing the portion of rental expense that management believes
is attributable to interest. There were no preferred dividends payable during the periods covered by the table.
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USE OF PROCEEDS
The net proceeds from the sale of the
offered securities will be used for general corporate purposes unless we specify otherwise in the prospectus supplement or free
writing prospectus applicable to a particular offering. General corporate purposes may include the repayment of debt, acquisitions,
stock repurchases, capital expenditures, funding employee obligations, investments in subsidiaries and joint ventures, and additions
to working capital. Net proceeds may be temporarily invested prior to use.
DESCRIPTION OF THE DEBT SECURITIES
The following is a general description
of the debt securities (the “Debt Securities”) that we may offer from time to time. The particular terms of the Debt
Securities offered by any prospectus supplement and the extent, if any, to which the general provisions described below may apply
will be described in the applicable prospectus supplement. Although our securities include securities denominated in U.S. dollars,
we may choose to issue securities in any other currency, including the euro.
The Debt Securities will be either senior Debt
Securities or subordinated Debt Securities. We will issue the senior Debt Securities under the senior indenture, dated as of May 21,
2007, between The Bank of New York Mellon, formerly known as The Bank of New York, or any successor trustee, and U. S. Steel,
as supplemented by the First Supplemental Indenture, dated as of May 21, 2007, the Second Supplemental Indenture, dated as
of December 10, 2007, the Third Supplemental Indenture, dated as of May 4, 2009, the Fourth Supplemental Indenture,
dated as of March 19, 2010, the Fifth Supplemental Indenture, dated as of March 15, 2012, the Sixth Supplemental Indenture,
dated as of March 26, 2013, and as further amended and supplemented from time to time. We will issue the subordinated Debt Securities
under a subordinated indenture to be entered into between U. S. Steel and a trustee. The senior indenture and the subordinated
indenture are collectively referred to in this prospectus as the indentures, and each of the trustee under the senior indenture
and the trustee under the subordinated indenture are referred to in this prospectus as the trustee. References to specific “Sections”
refer to the applicable Sections of the applicable indenture.
The following description is only a summary
of the material provisions of the indentures. We urge you to read the appropriate indenture because it, and not this description,
defines your rights as a holder of the Debt Securities. See the information under the heading “Incorporation of Certain Information
by Reference” to contact us for a copy of the appropriate indenture.
General
The senior Debt Securities will be
unsubordinated obligations, will rank on par with all other unsubordinated debt obligations of U. S. Steel and, unless otherwise
indicated in the related prospectus supplement, will be unsecured. The subordinated Debt Securities will be subordinate in right
of payment to Senior Indebtedness (as hereinafter defined under the heading “Subordinated Debt Securities—Subordination”).
A description of the subordinated Debt Securities is provided below under the heading “Subordinated Debt Securities.”
The specific terms of any subordinated Debt Securities will be provided in the related prospectus supplement. For a complete understanding
of the provisions pertaining to the subordinated Debt Securities, you should refer to the subordinated indenture attached as an
exhibit to this registration statement.
Terms
The indentures do not limit the principal
amount of debt we may issue.
The Debt Securities of any series may
be issued in definitive form or, if provided in the related prospectus supplement, may be represented in whole or in part by a
global security or securities, registered in the name of a depositary designated by U. S. Steel. Each Debt Security represented
by a global security is referred to as a “book-entry security.”
Debt Securities may be issued from time
to time pursuant to this prospectus, and will be offered on terms determined at the time of sale. Debt Securities may be issued
in one or more series with the same or various maturities and may be sold at par, a premium or an original issue discount. Debt
Securities sold at an original issue discount may bear no interest or interest at a rate that is below market rates. Debt Securities
may be denominated in U.S. dollars or other currencies, and unless otherwise provided in the applicable prospectus supplement,
Debt Securities denominated in U.S. dollars will be issued in denominations of $1,000 and integral multiples thereof.
Please refer to the applicable prospectus
supplement for the specific terms of the Debt Securities offered including the following:
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Designation of an aggregate principal amount, purchase price, denomination and whether senior or subordinated;
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If other than U.S. currency, the currency for which the Debt Securities may be purchased;
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The interest rate or rates and, if floating rate, the method of calculating interest;
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The times at which any premium and interest will be payable;
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The place or places where principal, any premium and interest will be payable;
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7.
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Any redemption or sinking fund provisions or other repayment obligations;
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Any index used to determine the amount of payment of principal of and any premium and interest on the Debt Securities;
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The application, if any, of the defeasance provisions to the Debt Securities;
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If other than the entire principal amount, the portion of the Debt Securities that would be payable upon acceleration of the
maturity thereof;
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Any obligation we may have to redeem, purchase or repay the Debt Securities at the option of a holder upon the happening of
any event and the terms and conditions of redemption, purchase or repayment;
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Whether the Debt Securities will be issued in whole or in part in the form of one or more global securities, and in such case,
the depositary for the global securities;
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Any additional covenants applicable to the Debt Securities being offered;
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Any additional events of default applicable to the Debt Securities being offered;
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The terms of subordination, if applicable;
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The terms of conversion, if applicable;
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Any material provisions of the applicable indenture described in this prospectus that do not apply to the Debt Securities;
and
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Any other specific terms including any terms that may be required by or advisable under applicable law.
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Except with respect to Book-Entry Securities,
Debt Securities may be presented for exchange or registration of transfer, in the manner, at the places and subject to the restrictions
set forth in the Debt Securities and the applicable prospectus supplement. Such services will be provided without charge, other
than any tax or other governmental charge payable in connection therewith, but subject to the limitations provided in the indentures.
Certain Covenants of U. S. Steel in the Indentures
Payment
U. S. Steel will pay principal of and
premium, if any, and interest on the Debt Securities at the place and time described in the Debt Securities (Section 10.01). Unless
otherwise provided in the applicable prospectus supplement, U. S. Steel will pay interest on any Debt Security to the person in
whose name that security is registered at the close of business on the regular record date for that interest payment (Section 3.07).
Any money deposited with the trustee
or any paying agent for the payment of principal of or any premium or interest on any Debt Security that remains unclaimed for
two years after that amount has become due and payable will be paid to U. S. Steel at its request. After this occurs, the holder
of that security must look only to U. S. Steel for payment of that amount and not to the trustee or paying agent (Section 10.03).
Merger and Consolidation
U. S. Steel will not merge or consolidate with
any other entity or sell or convey all or substantially all of its assets to any person, firm, corporation or other entity, except
that U. S. Steel may merge or consolidate with, or sell or convey all or substantially all of its assets to, any other entity
if (i) U. S. Steel is the continuing entity, or the successor entity (if other than U. S. Steel) is organized and existing
under the laws of the United States of America, any State thereof or the District of Columbia, and such entity expressly assumes
payment of the principal and interest on all the Debt Securities, and the performance and observance of all of the covenants and
conditions of the applicable indenture to be performed by U. S. Steel and (ii) there is no default under the applicable indenture.
Upon such a succession, U. S. Steel will be relieved from any further obligations under the applicable indenture. The indentures
define “substantially all of its assets” as, at any date, a portion of the non-current assets reflected in U. S. Steel’s
consolidated balance sheet as of the end of the most recent quarterly period that represents at least 66-2/3% of the total
reported value of such assets (Section 8.01).
Waiver of Certain Covenants
Unless otherwise provided in the applicable
prospectus supplement, U. S. Steel may, with respect to the Debt Securities of any series, omit to comply with any covenant provided
in the terms of those Debt Securities if, before the time for such compliance, holders of at least a majority in principal amount
of the outstanding Debt Securities of that series waive such compliance in that instance or generally (Section 10.06).
Events of Default
An Event of Default occurs with respect
to any series of Debt Securities when: (i) U. S. Steel defaults in paying interest on the Debt Securities of such series when
due, and such default continues for 30 days; (ii) U. S. Steel defaults in paying principal of or premium, if any, on any of
the Debt Securities of such series when due; (iii) U. S. Steel defaults in making deposits into any sinking fund payment with
respect to any Debt Security of such series when due, and such default continues for 30 days; (iv) failure by U. S. Steel
in the performance of any other covenant or warranty in the Debt Securities of such series or in the applicable indenture continues
for a period of 90 days after notice of such failure as provided in that indenture; (v) certain events of bankruptcy, insolvency,
or reorganization occur; or (vi) any other Event of Default provided with respect to Debt Securities of that series occurs
(Section 5.01).
U. S. Steel is required annually to deliver
to the trustee officers’ certificates stating whether or not the signers have any knowledge of any default in the performance
by U. S. Steel of certain covenants (Section 10.04).
If an Event of Default regarding Debt
Securities of any series issued under the indentures occurs and is continuing, either the trustee or the holders of not less than
25% in principal amount of the outstanding Debt Securities of such series may declare each Debt Security of that series due and
payable (Section 5.02).
An Event of Default regarding one series
of Debt Securities issued under an indenture is not necessarily an Event of Default regarding any other series of Debt Securities.
Holders of a majority in principal amount of
the outstanding Debt Securities of any series will be entitled to control certain actions of the trustee under the indentures
and to waive certain past defaults regarding such series (Sections 5.12 and 5.13). The trustee generally cannot be required by
any of the holders of Debt Securities to take any action, unless one or more of such holders shall have provided to the trustee
security or indemnity satisfactory to it (Section 6.02).
If an Event of Default occurs and is
continuing regarding a series of Debt Securities, the trustee may use any sums that it holds under the relevant indenture for its
own reasonable compensation and expenses incurred prior to paying the holders of Debt Securities of such series (Section 5.06).
Before any holder of any series of Debt
Securities may institute action for any remedy, except payment on such holder’s Debt Security when due, the holders of not
less than 25% in principal amount of the outstanding Debt Securities of that series must request the trustee to take action. Holders
must also offer and give the trustee satisfactory security and indemnity against liabilities incurred by the trustee for taking
such action (Section 5.07).
Modification of the Indentures
Each indenture contains provisions
permitting U. S. Steel and the trustee to modify that indenture or enter into or modify any supplemental indenture without the
consent of the holders of the Debt Securities in regard to matters as shall not adversely affect the interests of the holders of
the Debt Securities, including, without limitation, the following: (a) to evidence the succession of another corporation to
U. S. Steel; (b) to add to the covenants of U. S. Steel further covenants for the benefit or protection of the holders of
any or all series of Debt Securities or to surrender any right or power conferred upon U. S. Steel by that indenture; (c) to
add any additional events of default with respect to all or any series of Debt Securities; (d) to add to or change any of
the provisions of that indenture to facilitate the issuance of Debt Securities in bearer form with or without coupons, or to permit
or facilitate the issuance of Debt Securities in uncertificated form; (e) to add to, change or eliminate any of the provisions
of that indenture in respect of one or more series of Debt Securities thereunder, under certain conditions designed to protect
the rights of any existing holder of those Debt Securities; (f) to secure all or any series of Debt Securities; (g) to
establish the forms or terms of the Debt Securities of any series; (h) to evidence the appointment of a successor trustee
and to add to or change provisions of that indenture necessary to provide for or facilitate the administration of the trusts under
that indenture by more than one trustee; or (i) to cure any ambiguity, to correct or supplement any provision of that indenture
which may be defective or inconsistent with another provision of that indenture or to make other amendments that do not adversely
affect the interests of the holders of any series of Debt Securities in any material respect (Section 9.01).
U. S. Steel and the trustee may otherwise
modify each indenture or any supplemental indenture with the consent of the holders of not less than a majority in aggregate principal
amount of each series of Debt Securities affected thereby at the time outstanding, except that no such modifications shall, without
the consent of the holder of each Debt Security affected thereby (i) extend the fixed maturity of any Debt Securities or any
installment of interest or premium on any Debt Securities, or reduce the principal amount thereof or reduce the rate of interest
or premium payable upon redemption, or reduce the amount of principal of an original issue discount Debt Security or any other
Debt Security that would be due and payable upon a declaration of acceleration of the maturity thereof, or change the currency
in which the Debt Securities are payable or impair the right to institute suit for the enforcement of any payment after the stated
maturity thereof or the redemption date, if applicable, or adversely affect any right of the holder of any Debt Security to require
U. S. Steel to repurchase that security, (ii) reduce the percentage in principal amount of outstanding Debt Securities of
any series, the consent of the holders of which is required for any waiver or supplemental indenture, (iii) modify the provisions
of that indenture relating to the waiver of past defaults or the waiver or certain covenants or the provisions described under
the heading “Modification of the Indentures,” except to increase any percentage set forth in those provisions or to
provide that other provisions of that indenture may not be modified without the consent of the holder of each Debt Security affected
thereby, (iv) change any obligation of U. S. Steel to maintain an office or agency, (v) change any obligation of U. S. Steel to pay additional amounts, (vi) adversely affect the right of repayment or repurchase at the option of the Holder, or
(vii) reduce or postpone any sinking fund or similar provision (Section 9.02).
Satisfaction and Discharge; Defeasance and Covenant
Defeasance
Each indenture shall be satisfied and
discharged if (i) U. S. Steel shall deliver to the trustee all Debt Securities then outstanding for cancellation or (ii) all
Debt Securities not delivered to the trustee for cancellation shall have become due and payable, are to become due and payable
within one year or are to be called for redemption within one year and U. S. Steel shall deposit an amount sufficient to pay the
principal, premium, if any, and interest to the date of maturity, redemption or deposit (in the case of Debt Securities that have
become due and payable), provided that in either case U. S. Steel shall have paid all other sums payable under that indenture (Section
4.01).
Each indenture provides, if such provision
is made applicable to the Debt Securities of a series, (i) that U. S. Steel may elect either (A) to defease and
be discharged from any and all obligations with respect to any Debt Security of such series (except for the obligations to register
the transfer or exchange of such Debt Security, to replace temporary or mutilated, destroyed, lost or stolen Debt Securities, to
maintain an office or agency in respect of the Debt Securities and to hold moneys for payment in trust) (“defeasance”)
or (B) to be released from its obligations with respect to such Debt Security under Section 8.01 of that indenture (being
the restrictions described above under the heading “Certain Covenants of U. S. Steel in the Indentures”) together with
additional covenants that may be included for a particular series and (ii) that Sections 5.01(3), 5.01(4) (as to Section 8.01)
and 5.01(7), as described in clauses (iii), (iv) and (vi) under “Events of Default,” shall not be Events
of Default under that indenture with respect to such series (“covenant defeasance”), upon the deposit with the trustee
(or other qualifying trustee), in trust for such purpose, of money, certain U.S. government obligations and/or, in the case of
Debt Securities denominated in U.S. dollars, certain state and local government obligations which through the payment of principal
and interest in accordance with their terms will provide money, in an amount sufficient to pay the principal of (and premium, if
any) and interest on such Debt Security, on the scheduled due dates. In the case of defeasance, the holders of such Debt Securities
are entitled to receive payments in respect of such Debt Securities solely from such trust. Such a trust may only be established
if, among other things, U. S. Steel has delivered to the trustee an Opinion of Counsel (as specified in the indentures) to the
effect that the holders of the Debt Securities affected thereby will not recognize income, gain or loss for Federal income tax
purposes as a result of such defeasance or covenant defeasance and will be subject to Federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if such defeasance or covenant defeasance had not occurred. Such
Opinion of Counsel, in the case of defeasance under clause (A) above, must refer to and be based upon a ruling of the Internal
Revenue Service or a change in applicable Federal income tax law occurring after the date of the indentures (Section 13.04).
Record Dates
The indentures provide that in certain
circumstances U. S. Steel may establish a record date for determining the holders of outstanding Debt Securities of a series entitled
to join in the giving of notice or the taking of other action under the applicable indenture by the holders of the Debt Securities
of such series.
Subordinated Debt Securities
Although the senior indenture and the
subordinated indenture are generally similar and many of the provisions discussed above pertain to both senior and subordinated
Debt Securities, there are many substantive differences between the two. This section discusses some of those differences.
Subordination
Subordinated Debt Securities will be
subordinate, in right of payment, to all Senior Indebtedness. “Senior Indebtedness” is defined to mean, with respect
to U. S. Steel, the principal, premium, if any, and interest, fees, charges, expenses, reimbursement obligations, guarantees and
other amounts owing with respect to all indebtedness of U. S. Steel (including indebtedness of others guaranteed by U. S. Steel),
whether outstanding on the date of the indenture or the date Debt Securities of any series are issued under the indenture or thereafter
created, incurred or assumed, unless, in any case, in the instrument creating or evidencing any such indebtedness or obligation,
or pursuant to which the same is outstanding, it is provided that such indebtedness or obligation is not superior in right of payment
to the subordinated Debt Securities or that such obligation is subordinated to Senior Indebtedness to substantially the same extent
as the subordinated Debt Securities are subordinated to Senior Indebtedness.
Terms of Subordinated Debt Securities may
contain Conversion or Exchange Provisions
The prospectus supplement applicable
to a particular series of subordinated Debt Securities will describe the specific terms discussed above that apply to the subordinated
Debt Securities being offered thereby as well as any applicable conversion or exchange provisions.
Modification of the Indenture Relating to
Subordinated Debt Securities
The subordinated indenture may be modified
by U. S. Steel and the trustee without the consent of the Holders of the subordinated Debt Securities for one or more of the purposes
discussed above under the heading “Modification of the Indentures.” U. S. Steel and the trustee may also modify the
subordinated indenture to make provision with respect to any conversion or exchange rights for a given issue of subordinated Debt
Securities.
Governing Law
The laws of the State of New York govern
each indenture and will govern the Debt Securities (Section 1.12).
Book-Entry Securities
The following description of book-entry
securities will apply to any series of Debt Securities issued in whole or in part in the form of one or more global securities,
except as otherwise described in the applicable prospectus supplement.
Book-entry securities of like tenor and
having the same date will be represented by one or more global securities deposited with and registered in the name of a depositary
that is a clearing agent registered under the Exchange Act. Beneficial interests in book-entry securities will be limited to institutions
that have accounts with the depositary (“participants”) or persons that may hold interests through participants. Ownership
of beneficial interests by participants will only be evidenced by, and the transfer of that ownership interest will only be effected
through, records maintained by the depositary. Ownership of beneficial interests by persons that hold through participants will
only be evidenced by, and the transfer of that ownership interest within such participant will only be effected through, records
maintained by the participants. The laws of some jurisdictions require that certain purchasers of securities take physical delivery
of such securities in definitive form. Such laws may impair the ability to transfer beneficial interests in a global security.
Payment of principal of and any premium
and interest on book-entry securities represented by a global security registered in the name of or held by a depositary will be
made to the depositary, as the registered owner of the global security. Neither U. S. Steel, the trustee nor any agent of U. S.
Steel or the trustee will have any responsibility or liability for any aspect of the depositary’s records or any participant’s
records relating to or payments made on account of beneficial ownership interests in a global security or for maintaining, supervising
or reviewing any of the depositary’s records or any participant’s records relating to the beneficial ownership interests.
Payments by participants to owners of beneficial interests in a global security held through such participants will be governed
by the depositary’s procedures, as is now the case with securities held for the accounts of customers registered in “street
name,” and will be the sole responsibility of such participants.
A global security representing a book-entry
security is exchangeable for definitive Debt Securities in registered form, of like tenor and of an equal aggregate principal amount
registered in the name of, or is transferable in whole or in part to, a person other than the depositary for that global security,
only if (a) the depositary notifies U. S. Steel that it is unwilling or unable to continue as depositary for that global security
or the depositary ceases to be a clearing agency registered under the Exchange Act, (b) there shall have occurred and be continuing
an Event of Default with respect to the Debt Securities of that series or (c) other circumstances exist that have been specified
in the terms of the Debt Securities of that series. Any global security that is exchangeable pursuant to the preceding sentence
shall be registered in the name or names of such person or persons as the depositary shall instruct the trustee. It is expected
that such instructions may be based upon directions received by the depositary from its participants with respect to ownership
of beneficial interests in such global security.
Except as provided above, owners of beneficial
interests in a global security will not be entitled to receive physical delivery of Debt Securities in definitive form and will
not be considered the holders thereof for any purpose under the indentures, and no global security shall be exchangeable, except
for a security registered in the name of the depositary. This means each person owning a beneficial interest in such global security
must rely on the procedures of the depositary and, if such person is not a participant, on the procedures of the participant through
which such person owns its interest, to exercise any rights of a holder under the indentures. U. S. Steel understands that under
existing industry practices, if U. S. Steel requests any action of holders or an owner of a beneficial interest in such global
security desires to give or take any action that a holder is entitled to give or take under the indentures, the depositary would
authorize the participants holding the relevant beneficial interests to give or take such action, and such participants would authorize
beneficial owners owning through such participant to give or take such action or would otherwise act upon the instructions of beneficial
owners owning through them.
Concerning the Trustee
The Bank of New York Mellon is also trustee
for our 6.05% Senior Notes due June 1, 2017, our 6.65% Senior Notes due June 1, 2037, our 7.00% Senior Notes due February 1,
2018, our 7.375% Senior Notes due April 1, 2020, our 6.875% Senior Notes due April 1, 2021, our 7.50% Senior Notes
due March 15, 2022, and several series of obligations issued by various governmental authorities relating to environmental
projects at various U. S. Steel facilities. The Bank of New York Mellon is a lender under our revolving credit facility. U. S.
Steel and its subsidiaries also maintain ordinary banking relationships, including loans and deposit accounts, with The Bank of
New York Mellon and its affiliates. We anticipate that we will continue to do so in the future.
DESCRIPTION OF CAPITAL STOCK
The following description of certain
terms of our capital stock does not purport to be complete and is subject to, and qualified in its entirety by reference to, our
restated certificate of incorporation, as amended (the “Certificate of Incorporation”), our by-laws, as amended (the
“By-Laws”), and the applicable provisions of the Delaware General Corporation Law (the “DGCL”). For more
information on how you can obtain the Certificate of Incorporation and the By-Laws, see “Where You Can Find More Information.”
General
Under the Certificate of Incorporation, we
are authorized to issue up to 440,000,000 shares of capital stock, consisting of 400,000,000 shares of common stock, par value
$1.00 per share, and 40,000,000 shares of preferred stock, without par value. As of February 29, 2016, there were 146,419,703
shares of common stock outstanding and no shares of preferred stock outstanding.
Common Stock
The holders of common stock are entitled to
receive dividends when, as and if declared by the U. S. Steel board of directors out of funds legally available therefor, subject
to the rights of any shares of preferred stock at the time outstanding. In the event of dissolution, liquidation or winding up
of U. S. Steel, holders of the common stock will be entitled to share ratably in any assets remaining after the satisfaction in
full of the prior rights of creditors, including holders of any then outstanding indebtedness, and subject to the aggregate liquidation
preference and participation rights of any preferred stock then outstanding. The shares of common stock currently outstanding
are fully paid and non-assessable.
The prospectus supplement relating to any common
stock being offered will include specific terms relating to such offering.
Preferred Stock
Shares of preferred stock may be issued without
the approval of the holders of common stock in one or more series, from time to time. Our board of directors is expressly authorized
(i) to fix the descriptions, powers, preferences, rights, qualifications, limitations, restrictions and any other terms
with respect to any series of preferred stock and (ii) to specify the number of shares of any series of preferred stock.
Holders of preferred stock may be entitled
to receive dividends (other than dividends of common stock) before any dividends are payable to holders of common stock. Any future
issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control of U. S. Steel.
The prospectus supplement relating to
any preferred stock being offered will include specific terms relating to the offering.
Stock Transfer Agent and Registrar
Wells Fargo Bank, N.A., 1110 Centre Pointe Curve
Suite 101, Mendota Heights MN 55120-4100, serves as transfer agent and registrar for the common stock of U. S. Steel.
Delaware Law, Our Certificate of Incorporation and By-Laws
Contain Provisions That May Have an Anti-Takeover Effect
Delaware Law.
As a Delaware corporation,
we are subject to the provisions of Section 203 of the DGCL. In general, Section 203 prohibits a publicly-held Delaware
corporation from engaging in a “business combination” with an “interested stockholder” for a period of
three years following the time that the person became an interested stockholder, unless:
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Prior to the time that the person became an interested stockholder the corporation’s board
of directors approved either the business combination or the transaction that resulted in the stockholder becoming an interested
stockholder;
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Upon consummation of the transaction which resulted in the stockholder becoming an interested
stockholder, the stockholder owned at least 85% of the outstanding voting stock of the corporation at the time the transaction
commenced, excluding for the purpose of determining the number of shares outstanding those shares owned by the corporation’s
officers and directors and by employee stock plans in which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange offer; or
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At or subsequent to the time, the business combination is approved by the corporation’s
board of directors and authorized at an annual or special meeting of its stockholders, and not by written consent, by the affirmative
vote of at least 66 2/3% of its outstanding voting stock that is not owned by the interested stockholder.
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A “business combination”
includes, among other things, mergers, asset sales or other transactions resulting in a financial benefit to the stockholder. An
“interested stockholder” is a person who, together with affiliates and associates, owns (or within three years did
own) 15% or more of the corporation’s voting stock.
Certificate of Incorporation and By-Laws.
Various provisions contained in the Certificate of Incorporation and the By-laws could delay or discourage stockholder actions
with respect to transactions involving an actual or potential change in control of us or a change in our management and may limit
the ability of our stockholders to remove current management or approve transactions that our stockholders may deem to be in their
best interests. Among other things, these provisions:
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Require that any action required or permitted to be taken by our stockholders must be effected
at a duly called annual or special meeting and may not be taken by written consent;
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provide that special meetings of stockholders may be called only by the board of directors and
not by the stockholders;
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do not permit cumulative voting for directors;
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permit the issuance of preferred stock, at the discretion of our board of directors, from time
to time, in one or more series, without further action by our stockholders, unless approval of our stockholders is deemed advisable
by our board of directors or required by applicable law, regulation or stock exchange listing requirements; and
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provide that vacancies in our board of directors may be filled only by the affirmative vote of
a majority of the remaining directors.
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Additionally, prior to 2014, our Certificate
of Incorporation provided for a classified board structure, consisting of three classes of directors serving three-year terms.
In 2014, the Certificate of Incorporation was amended to provide that directors shall be elected for one-year terms, beginning
with the 2015 annual meeting of stockholders. The declassification of our board of directors will be complete as of the 2017 annual
meeting of stockholders.
DESCRIPTION OF OTHER
SECURITIES
We will set forth, in the applicable
prospectus supplement, a description of any warrants, depositary shares, convertible or exchangeable securities, stock purchase
contracts, or stock purchase units that may be offered pursuant to this prospectus.
SELLING SECURITY HOLDERS
The applicable prospectus supplement will set
forth the name of each selling security holder and the number of and type of securities beneficially owned by such selling security
holder prior to and after the completion of an offering that are covered by such prospectus supplement. The applicable
prospectus supplement also will disclose whether any of the selling security holders have held any position or office with, have
been employed by or otherwise have had a material relationship with us or any of our affiliates during the three years
prior to the date of the prospectus supplement.
PLAN OF DISTRIBUTION
We may offer the offered securities in one or more of the
following ways from time to time:
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To or through underwriting syndicates represented by managing underwriters;
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Through one or more underwriters without a syndicate for them to offer and sell to the public;
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Through dealers or agents;
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To
investors directly in negotiated sales or in
competitively bid transactions; or
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To holders of other securities in exchanges in connection with acquisitions.
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The prospectus supplement for each
series of securities we sell will describe the offering, including:
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The name or names of any underwriters;
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The purchase price and the proceeds to us from that sale;
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Any underwriting discounts and other items constituting underwriters’ compensation;
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Any indemnification arrangements
between us and the underwriters;
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Any stabilizing or market making
transactions that the underwriters or any member of the selling group intend to engage
in;
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Any commissions paid to agents;
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The initial public offering price and any discounts or concessions allowed or reallowed or paid
to dealers; and
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Any securities exchanges on which the securities will be listed.
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LEGAL MATTERS
The validity of the issuance of the offered
securities will be passed upon for U. S. Steel by Arden T. Phillips, Esq., Corporate Secretary & Associate General Counsel.
Mr. Phillips, in his capacity as set forth above, is paid a salary by U. S. Steel, participates in various employee
benefit plans offered by U. S. Steel and owns, and has options to purchase, common stock of U. S. Steel.
EXPERTS
The financial statements and management’s
assessment of the effectiveness of internal control over financial reporting (which is included in Management’s Report to
Stockholders - Internal Control over Financial Reporting) incorporated in this Prospectus by reference to the Annual Report on
Form 10-K for the year ended December 31, 2015 have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
$750,000,000
6.875
%
Senior Notes due 2025
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P
R O S P E C T U S S U P P L E M E N T
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Joint
Book-Running Managers
BofA
Merrill Lynch
J.P.
Morgan
Barclays
Morgan
Stanley
PNC
Capital Markets LLC
Wells
Fargo Securities
Goldman
Sachs & Co. LLC
Senior Co-Managers
BMO Capital Markets
COMMERZBANK
Scotiabank
SunTrust Robinson Humphrey
Citigroup
ING
SOCIETE GENERALE
Co-Managers
BNY Mellon Capital Markets,
LLC
Citizens Capital Markets
Credit Suisse
Huntington Capital Markets
RBC Capital Markets
US Bancorp
August 1, 2017
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