Moody's downgrades Alcoa

Moody's Investors Service said it downgraded Alcoa Inc.'s senior unsecured ratings to Baa1 from A2, its short-term ratings to Prime-2 from Prime-1 and its preferred stock ratings to Baa3 from Baa1.

This concludes Moody's review, which began on May 7 when the company launched a hostile bid for Alcan and continued on July 17 following the company's withdrawal of its bid.

Moody's said the downgrade reflects the company's ongoing challenges in managing its cost position, its relatively weak average coverage ratios and its persistent negative free cash flow generation.

The Baa1 rating also considers the company's shareholder returns and its likely continued capital spending to support growth initiatives, the agency said.

The rating also considers the company's position as one of the largest integrated aluminum producers, its broad geographical footprint, its manageable debt repayment profile and the potential for improved performance as the company divests underperforming assets, the agency said.

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