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Alcoa (AA) Concludes Offering of Senior Notes, Split on Track

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Aluminum giant, Alcoa Inc. (AA - Free Report) announced that Alcoa Nederland Holding B.V., a fully owned unit of Alcoa Upstream Corporation (Alcoa Corporation), which is currently a wholly owned subsidiary of Alcoa, closed its offering of $750 million aggregate principal amount of 6.75% senior notes due 2024 and $500 million aggregate principal amount of 7.00% senior notes due 2026.

The issuer (Alcoa Nederland Holding B.V.) of the notes plans to use the proceeds from the proposed offering to make a payment to Alcoa. This is to fund the transfer of specific assets from Alcoa to the issuer in connection with Alcoa’s earlier announced plan to separate Alcoa into two independent, publicly traded companies.  The issuer also plans to utilize the proceeds for general corporate purposes.

The net proceeds from the planned offering will be held in escrow until the completion of the proposed spilt and the satisfaction of specific other escrow release conditions. The notes will initially be guaranteed on a senior unsecured basis by Alcoa Corporation and after the separation, by Alcoa Corporation and its certain subsidiaries.

Alcoa, in Sep 2015, declared the separation of its smelting and refining business from those that cater to aerospace and automotive markets. The separation will result in the creation of two stand-alone entities – Arconic Inc. and Alcoa Corporation.

Post separation, Alcoa Corporation will be a highly competitive entity in bauxite, alumina and aluminum production with a world-class asset base including the world’s biggest bauxite mining portfolio. It will also have the world’s largest alumina refining system. Roy Harvey, the incumbent President of Alcoa’s Global Primary Products business, will be the CEO of Alcoa Corporation.

On the other hand, Arconic will be a leading provider of high performance multi-material products and solutions in attractive markets including the fast-growing aerospace market. The aerospace market represents roughly 40% of the pro-forma revenues of this business. Alcoa's CEO Klaus Kleinfeld will lead Arconic as Chairman and CEO after the separation.

The separation will mark the completion of Alcoa’s multi-year transformation. The split will allow both companies to pursue their own independent strategies and provide shareholders with value-creating investment opportunities.


Alcoa, which is among the major mining companies along with Nevsun Resources Ltd. (NSU - Free Report) , Coeur Mining, Inc. (CDE - Free Report) and Freeport-McMoRan Inc. (FCX - Free Report) is also divesting non-core businesses to optimize portfolio and strengthen its balance sheet.

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