New York, April 26, 2022 -- Moody's Investors Service ("Moody's") placed Alcoa Nederland Holding B.V.'s ("ANHBV") Ba1 Corporate Family Rating, Ba1-PD Probability of Default Rating and Ba1 rating of senior unsecured notes under review for upgrade. The outlook has changed to rating under review from stable.
On Review for Possible Upgrade:
..Issuer: Alcoa Nederland Holding B.V.
.... Probability of Default Rating, Placed on Review for Possible Upgrade, currently Ba1-PD
.... Corporate Family Rating, Placed on Review for Possible Upgrade, currently Ba1
....Senior Unsecured Regular Bond/Debenture (Foreign Currency), Placed on Review for Possible Upgrade, currently Ba1 (LGD4)
Outlook Actions:
..Issuer: Alcoa Nederland Holding B.V.
....Outlook, Changed To Rating Under Review From Stable
RATINGS RATIONALE / FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Today's review action recognizes the improvement in ANHBV's ("Alcoa") credit profile driven by 1) the successful implementation of its strategic portfolio optimization program that enhanced the competitiveness of its refining and smelting system and improved the overall business resilience to cyclical downturns; 2) the balance sheet/pension liability management actions in 2021 taken by the company to reduce leverage, including the $1.5 billion annuitization and $500 million prefunding of U.S. gross pension liability and 3) material non-core asset sales. These actions along with historically high aluminum prices have enabled Alcoa to achieve investment grade credit metrics. Alcoa's debt/EBITDA was 0.8x as of December 31, 2021, down significantly from FYE 2020's 3.9x via a combination of increased EBITDA and about $1.9 million reduction in Moody's-adjusted debt.
The ratings review will examine Alcoa's ability to contain the significant aluminum industry cost inflation driven by rising prices for energy and raw materials, and logistical challenges. The review will focus on Alcoa's prospective ability to generate strong earnings and positive free cash at various aluminum and alumina prices, and its potential to sustain leverage and other debt protection metrics at levels commensurate with the investment grade credit profile in a less favorable aluminum price environment. Moody's will also consider the company's long-term operating strategy and financial policy.
Alcoa has a very good liquidity supported by cash position of $1.55 billion and $1.5 billion secured revolving credit facility (RCF - unrated) at Alcoa Nederland, guaranteed by Alcoa (parent) and maturing in November 2023. The revolver had about $1.5 billion availability at March 31, 2021, net of letters of credit. There are no material maturities until the revolver expires in November 2023.
Alcoa Nederland is a wholly owned subsidiary of Alcoa Corporation. Headquartered in Pittsburgh, PA, Alcoa holds the bauxite, alumina, aluminum, cast products and energy business. Alcoa's bauxite and alumina business is conducted through its AWAC joint venture with Alumina Ltd (60% Alcoa/40% Alumina Limited). Revenues for the twelve months ended December 31, 2021 were about $12.2 billion.
The principal methodology used in these ratings was Mining published in October 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1292752. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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 certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain 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.
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Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, 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 issued the credit rating is available on www.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.
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Botir Sharipov
VP-Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
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Glenn B. Eckert
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
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