DBRS Assigns BBB Rating to Alcoa New Debt Issue, Stable Trend

DBRS has today assigned a rating of BBB with a Stable trend to the senior unsecured notes (New Notes) to be issued by Alcoa Inc. (Alcoa or the Company). The issuance of $1.25 billion principal amount of 5.40% New Notes, maturing April 15, 2021, follows the Company’s announcement today that it intends to issue the New Notes to, in part, finance a tender offer for up to $750 million of 5.375% notes due 2013 and 6.00% notes due 2013 (Outstanding Notes) currently outstanding. 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.

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 New Notes will be general unsecured obligations of Alcoa that will rank senior in right of payment to any of Alcoa’s future indebtedness that is expressly subordinated in right of payment to the New Notes and equally in right of payment with all of Alcoa’s existing and future unsecured indebtedness and liabilities that are not so subordinated. The notes will effectively rank junior to any secured indebtedness of the Company to the extent of the value of the assets securing such indebtedness and will be effectively subordinated to all debt and other liabilities of Alcoa’s subsidiaries. As at December 31, 2010, approximately $1.3 billion of Alcoa’s $9.2 billion total consolidated indebtedness was to third parties of its subsidiaries and is structurally senior to the New Notes because that amount of debt consists of obligations at the subsidiary level.

Alcoa continues to emerge from a period of serious challenges brought on by the 2008–2009 economic recession. With economic recovery underway, the Company’s credit metrics improved in 2010 and have generally shown further improvement in the first quarter of 2011.

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.