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Alcoa Plans Biggest Debt Offering in Two Years Today (Update3)
Jul 27,2010 10:42CST
industry news

NEW YORK, July 26 -- Alcoa Inc., the largest U.S. aluminum producer, plan to sell $1 billion of notes as soon as today in its biggest offering in two years, according to a person familiar with the transaction.

The 10-year notes may yield about 318 basis points more than similar-maturity Treasuries, said the person, who declined to be identified because terms aren't set. Proceeds will be used with cash on hand to repay outstanding debt, the New York-based company said today in a regulatory filing that didn't include the size or timing of the sale.

Alcoa is marketing bonds less than two weeks after it reported second-quarter sales and profit that beat analysts' estimates and forecast higher global demand for the metal. The aluminum producer is conducting the sale in conjunction with a tender offer for outstanding debt, according to a statement distributed by Business Wire.

"As the tender offer is to be funded with a new bond issue, and Alcoa is paying a premium on the tendered bonds, the result of these actions won't diminish the company's net debt load," Carol Levenson, director of research at Gimme Credit LLC said in a note today. "The maturity extension will be a slight credit positive."

Alcoa plans to purchase its outstanding 6.5 percent notes due in June 2011, 6 percent notes maturing in January 2012 and 5.375 percent bonds due in January 2013, it said in the filing. Alcoa has $583.5 million outstanding of the 6.5 percent debt, $516.7 million of the 6 percent notes and $600 million of the 5.375 percent notes, according to the filing.

Previous Sales

The aluminum producer sold $1.5 billion of notes in a two- part offering in July 2008, according to data compiled by Bloomberg. Its last debt offering was in March 2009, when Alcoa sold $575 million of convertible notes, Bloomberg data show.

The company had $1.34 billion of cash at the end of the second quarter, Alcoa Chief Financial Officer Charles McLane said in a conference call last month.

The notes due in 2020 may be rated Baa3 by Moody's Investors Service and BBB- by Standard & Poor's, the person familiar with the sale said. A basis point is 0.01 percentage point.

Bank of America Merrill Lynch, Citigroup Inc. and Deutsche Bank AG are managing the offering for the company, according to today's filing.



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