DBRS Assigns BBB Rating to Alcoa Debt Issue, Stable Trend

DBRS has today assigned a rating of BBB with a Stable trend to the senior unsecured notes (New Notes) issued by Alcoa Inc. (Alcoa or the Company). The issuance of $1.0 billion principal amount of 6.150% notes maturing August 15, 2020, follows the Company’s announcement on July 26, 2010, that it intended to issue the New Notes to, in part, finance a tender offer for up to $750 million of several series of the Company’s outstanding long-term debt issues. The Company has also indicated that it will repay approximately $511 million of its 7-3/8% notes due August 1, 2010, at their maturity with cash on hand. DBRS views these as appropriate transactions that will help better match Alcoa’s anticipated near-term operating cash flows with its debt financing and investment needs, including investments in the Ma’aden greenfield aluminum project in Saudi Arabia. If the transactions are completed as contemplated, no changes in Alcoa’s ratings are anticipated.

If the tender offer fails to attract a sufficient principal amount of notes to utilize the funds to be raised by the New Notes issuance, the Company has indicated that it intends to use any net proceeds remaining to repay other outstanding indebtedness as determined by management, or for general corporate purposes. The issuance of the New Notes is expected to close on or about August 3, 2010. It is expected that net proceeds raised via the debt offering may be invested in short-term investments, prior to their use.

Alcoa continues to emerge from a period of serious challenges brought on by the 2008-2009 economic recession. The Company’s credit metrics were impaired throughout the downturn, but Alcoa has been able to weather the storm by taking actions to reduce its costs, complete important capital projects and re-establish a sound liquidity profile. With economic recovery underway, the Company’s credit metrics are expected to improve in 2010 to a level more commensurate with its assigned ratings. If the Company’s coverage metrics fail to improve as expected, negative rating actions may be taken.

On March 17, 2010, DBRS confirmed the Senior Unsecured Debt rating of Alcoa at BBB and its Commercial Paper rating at R-2 (middle), both with Stable trends. A copy of that press release is available at www.dbrs.com.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodology is Rating Mining, which can be found on our website under Methodologies.

This is a Corporate rating.