Alcoa Corporation Announces Proposed Debt Offering

Rhea-AI Summary

Alcoa (NYSE:AA) has announced a proposed offering of $1 billion in senior notes through its wholly-owned subsidiary Alumina Pty The notes will be guaranteed on a senior unsecured basis by Alcoa and certain subsidiaries.

The funds will be deployed within the Alcoa group, primarily to finance tender offers for existing notes: the entire $750 million of 5.500% Notes due 2027 and up to $250 million of 6.125% Notes due 2028. Any remaining proceeds will be used for general corporate purposes, potentially including the redemption of these existing notes.

The notes will be sold privately to qualified institutional buyers under Rule 144A and to non-US persons under Regulation S of the Securities Act. The offering is not conditional upon the completion of the tender offers.

Positive

• Debt refinancing opportunity through new $1B note offering
• Potential reduction in interest expense through refinancing of higher-rate notes
• Improved debt maturity profile through tender of 2027 and 2028 notes

Negative

• Maintaining substantial debt levels with $1B new offering
• Additional transaction costs and premiums for tender offers

Insights

Finance Analyst

Alcoa's $1 billion debt offering announcement signals a strategic refinancing initiative rather than expansion of its debt load. The company is essentially restructuring existing obligations by targeting $750 million of its 5.500% 2027 notes and up to $250 million of its 6.125% 2028 notes through tender offers.

The transaction architecture is particularly notable, utilizing Alcoa's global corporate structure with funds flowing from Australian subsidiary Alumina Pty to Dutch entity Alcoa Nederland Holding B.V. This complex approach likely optimizes tax efficiency while managing the company's liability profile.

For a company with an $8.65 billion market capitalization, this $1 billion transaction represents a material financial maneuver. The tender offers will almost certainly require premium payments above par value to incentivize noteholders to participate, representing a near-term cash cost in exchange for potential longer-term benefits.

The refinancing comes at a pivotal time for the aluminum producer, potentially allowing the company to extend its debt maturity profile and capitalize on market conditions for corporate debt. While total debt levels may remain relatively unchanged, successful execution could enhance Alcoa's financial flexibility and optimize its interest expense profile – important factors in the capital-intensive and cyclical aluminum industry where liquidity management is paramount.

PITTSBURGH--(BUSINESS WIRE)-- Alcoa Corporation (NYSE:AA; ASX:AAI) (“Alcoa”) announced today a proposed offering of $1,000,000,000 aggregate principal amount of senior notes (the “notes”) by Alumina Pty Ltd (ABN 85 004 820 419) (the “Issuer”), a wholly-owned subsidiary of Alcoa. The notes will be guaranteed on a senior unsecured basis by Alcoa and certain of its subsidiaries. The timing of pricing and terms of the notes are subject to market conditions and other factors.

The Issuer intends to deploy the funds within the Alcoa group, including funding contributions to Alcoa Nederland Holding B.V. (“ANHBV”), a wholly-owned subsidiary of Alcoa and the issuer of the outstanding $750 million aggregate principal amount of 5.500% Notes due 2027 (the “Existing 2027 Notes”) and $500 million aggregate principal amount of 6.125% Notes due 2028 (the “Existing 2028 Notes”). These contributions will be funded through a series of intercompany transactions, including the repayment of intercompany indebtedness and the issuance of intercompany dividends. ANHBV intends to use any such funds, along with cash on hand, to fund the purchase price pursuant to the cash tender offers (the “Tender Offers”) also announced today for any and all of the Existing 2027 Notes and up to $250 million of the Existing 2028 Notes to the extent tendered and accepted by ANHBV for purchase in the Tender Offers and to pay related transaction fees, including applicable premiums and expenses. If there are any net proceeds remaining from the offering, including if the Tender Offers are not consummated, Alcoa intends to use such funds for general corporate purposes, which may include the redemption by ANHBV of the Existing 2027 Notes and Existing 2028 Notes. The offering is not conditioned upon the consummation of the Tender Offers.

The notes and related guarantees will be sold in a private placement to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and to certain non-United States persons in offshore transactions in accordance with Regulation S under the Securities Act. The notes and related guarantees have not been and will not be registered under the Securities Act or the securities laws of any other jurisdiction and may not be offered or sold in the United States or to, or for the benefit of, U.S. persons absent registration under, or an applicable exemption from, the registration requirements of the Securities Act.

This press release does not constitute an offer to buy or sell or a solicitation of an offer to buy or sell the notes and related guarantees, the Existing 2027 Notes, the Existing 2028 Notes or any other security and there will be no offer, solicitation, purchase or sale in any state or jurisdiction in which, or to any persons to whom, such an offer, solicitation, purchase or sale would be unlawful. Any offers of the notes and related guarantees will be made only by means of a private offering memorandum. The Tender Offers are being made only by means of the relevant offer to purchase and notice of guaranteed delivery, as applicable.

About Alcoa

Alcoa is a global industry leader in bauxite, alumina and aluminum products with a vision to reinvent the aluminum industry for a sustainable future. Our purpose is to turn raw potential into real progress, underpinned by Alcoa Values that encompass integrity, operating excellence, care for people and courageous leadership. Since developing the process that made aluminum an affordable and vital part of modern life, our talented Alcoans have developed breakthrough innovations and best practices that have led to improved safety, sustainability, efficiency, and stronger communities wherever we operate.

Forward-Looking Statements

This press release contains statements that relate to future events and expectations, including those relating to the proposed notes offering, the intended use of the net proceeds from the issuance of the notes and the Tender Offers, and as such constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include those containing such words as “aims,” “ambition,” “anticipates,” “believes,” “could,” “develop,” “endeavors,” “estimates,” “expects,” “forecasts,” “goal,” “intends,” “may,” “outlook,” “potential,” “plans,” “projects,” “reach,” “seeks,” “sees,” “should,” “strive,” “targets,” “will,” “working,” “would,” or other words of similar meaning. All statements by Alcoa that reflect expectations, assumptions or projections about the future, other than statements of historical fact, are forward-looking statements. Forward-looking statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties, and changes in circumstances that are difficult to predict. Although Alcoa believes that the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that these expectations will be attained and it is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks and uncertainties. Additional information concerning factors that could cause actual results to differ materially from those projected in the forward-looking statements is contained in Alcoa’s filings with the Securities and Exchange Commission. Alcoa disclaims any obligation to update publicly any forward-looking statements, whether in response to new information, future events or otherwise, except as required by applicable law.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250302515239/en/

Investor Contact

Yolande Doctor

412-992-5450

Yolande.B.Doctor@alcoa.com

Media Contact

Courtney Boone

412-527-9792

Courtney.Boone@alcoa.com

Source: Alcoa

FAQ

What is the size of Alcoa's (AA) new debt offering in 2024?

Alcoa is offering $1 billion in senior notes through its subsidiary Alumina Pty

How will Alcoa (AA) use the proceeds from its $1 billion debt offering?

The proceeds will primarily fund tender offers for existing notes: $750M of 2027 notes and $250M of 2028 notes, with remaining funds for general corporate purposes.

What are the terms of Alcoa's (AA) existing notes being tendered?

The existing notes include $750M of 5.500% Notes due 2027 and $500M of 6.125% Notes due 2028, with up to $250M of the 2028 notes being targeted in the tender offer.

Who is eligible to participate in Alcoa's (AA) new debt offering?

The notes are being sold privately to qualified institutional buyers under Rule 144A and non-US persons under Regulation S of the Securities Act.