Alcoa cuts revolver; subsidiary signs $1.5 billion revolving agreement

By Wendy Van Sickle

Columbus, Ohio, Sept. 19 – Alcoa Inc. amended its five-year revolving credit agreement on Friday, and its subsidiary Alcoa Upstream Corp. entered into a new $1.5 billion revolver, according to an 8-K filing with the Securities and Exchange Commission.

The amended revolver’s commitments were reduced to $3 billion from $4 billion.

Also, its existing financial covenant based upon consolidated net worth will be replaced by a maximum ratio of debt to consolidated EBITDA.

The revolving credit agreement is originally dated July 25, 2014, and JPMorgan Chase Bank, NA is the administrative agent.

The new revolver allows for half of its commitments to be borrowed in euros. Proceeds are to be used to separate Alcoa into two standalone publicly traded companies as well as for working capital and general corporate purposes.

The revolver will not be available until certain conditions are met, including completion of the separation by June 30, 2017. The credit agreement will also be terminated if, prior to the satisfaction of the conditions, Alcoa Upstream receives a public corporate family rating from Moody’s Investors Service of B1 or lower or a public corporate credit rating of B+ or lower from S&P.

The credit facility will mature on the earlier of five years from the date that the funding conditions are met or Dec. 31, 2021, with certain extension rights at each lender’s discretion.

JPMorgan Chase, Bank of America Merrill Lynch, Banco Bilbao Vizcaya Argentaria, AS, New York branch, BNP Paribas Securities Corp., MUFG, Banco Bradesco SA, New York Branch, Citibank NA, Credit Suisse AG, Cayman Islands Branch, Deutsche Bank Securities Inc., Goldman Sachs Bank USA, Morgan Stanley Senior Funding, Inc., Sumitomo Mitsui Banking Corp., SunTrust Bank and ABN Amro Capital USA LLC are the joint lead arrangers and bookrunners.

JPMorgan is administrative agent, Citibank is syndication agent, and Credit Suisse and Morgan Stanley are co-documentation agents.

Borrowings will bear interest at Libor plus a margin from 175 basis points to 250 bps, and the commitment fee will range from 22.5 bps to 45 bps, depending on leverage ratio.

Alcoa Upstream will be required to maintain a minimum interest expense coverage ratio of 5 times and a maximum leverage ratio of 2.25 times.

Alcoa is a New York-based aluminum producer.

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