• On 21 May 2013, Moody’s announced rating actions on MBIA Insurance Corp., National Public Finance Guarantee Corp., MBIA Inc. and other related entities. Because of the large number of credits across several asset classes affected by these rating actions, including Moody's-rated securities that are guaranteed or "wrapped" by these companies, ratings appearing on this website may not yet reflect current information. For current information on affected credits, please visit www.moodys.com/fig.
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Announcement:

Moody's reviews Alcoa's ratings for downgrade

Global Credit Research - 18 Dec 2012

Approximately $8.6 billion of debt placed under review

New York, December 18, 2012 -- Moody's Investors Service placed Alcoa's Baa3 senior unsecured and Prime-3 short-term rating under review for downgrade.

On Review for Downgrade:

..Issuer: Alcoa Inc.

.... Commercial Paper, Placed on Review for Downgrade, currently P-3

....Multiple Seniority Shelf, Placed on Review for Downgrade, currently (P)Baa3

....Pref. Stock Preferred Stock, Placed on Review for Downgrade, currently Ba2

....Senior Unsecured Conv./Exch. Bond/Debenture, Placed on Review for Downgrade, currently Baa3

....Senior Unsecured Commercial Paper, Placed on Review for Downgrade, currently P-3

....Senior Unsecured Medium-Term Note Program, Placed on Review for Downgrade, currently (P)Baa3

....Senior Unsecured Regular Bond/Debenture, Placed on Review for Downgrade, currently Baa3

..Issuer: Chelan County Development Corporation, WA

....Senior Unsecured Revenue Bonds, Placed on Review for Downgrade, currently Baa3

..Issuer: Iowa Finance Authority

....Senior Unsecured Revenue Bonds, Placed on Review for Downgrade, currently Baa3

Outlook Actions:

..Issuer: Alcoa Inc.

....Outlook, Changed To Rating Under Review From Stable

RATINGS RATIONALE

The review reflects the challenging headwinds facing Alcoa given the decline in aluminum prices that has occurred, on a sequential quarterly basis, through September 30, 2012 (dropping almost 22% to an average of roughly $0.92/lb from the comparable 2011 average) and the adverse impact this has had on Alcoa's earnings performance and earnings based debt protection metrics in particular. Based upon Moody's standard adjustments, EBIT/interest has declined to 0.8x while debt/EBITDA has increased to roughly 6x for the twelve months through September 30, 2012 as compared with 2.4x and 3.8x respectively in 2011. Global economic conditions remain relatively weak and recovery in the aluminum industry remains slow and uneven. Europe's recession and sovereign debt crisis, sluggish performance in the US economy and slower growth in China are expected to continue to adversely impact the aluminum industry. We do not see a material, sustainable improvement in aluminum prices over the next several quarters and expect Alcoa's earnings performance and debt protection metrics to remain challenged.

Although the midstream Global Flat Rolled Products and downstream Engineered Products and Solutions segments have generated good after tax operating income performance and are expected to continue to exhibit reasonably stability in earnings, the alumina and primary metals segments remain susceptible to underperformance given current aluminum prices. We expect prices to remain range bound within trading levels of approximately $0.85/lb/$0.95/lb for the next several quarters.

The review will focus on Alcoa's cost position, particularly in its Alumina and Primary segments, and its ability to improve its earnings position on its asset base as well as reduce debt to levels more commensurate with the lower earnings run rate. The review will also encompass the company's cash outflow requirements, including capital expenditures and cash payments under the settlement with the Italian government for Italy recouping electricity tariffs and overall liquidity position.

The principal methodology used in rating Alcoa was the Global Mining Industry Methodology published in May 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Headquartered in New York City, New York, Alcoa is a leading global integrated aluminum producer active in all major aspects of the industry, including the mining of bauxite, refining into alumina, smelting and recycling. Through its Global Flat Rolled Products and Engineered Products and Solutions segments, the company provides value added products to a diversity of end markets. Revenues for the twelve months through September 30, 2012 were approximately$24 billion.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Carol Cowan
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Brian Oak
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's reviews Alcoa's ratings for downgrade
No Related Data.

 

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