S&P slices Alumina

S&P said it lowered its ratings for Alumina Ltd. and its A$500 million senior unsecured medium-term note program to BB from BBB- and removed them from CreditWatch with negative implications where they were placed on Sept. 5. The outlook is negative.

“For 2024, we expect the company to continue to report negative free operating cash flow (FOCF) because of restructuring costs at operating joint venture (JV) Alcoa World Alumina and Chemicals (AWAC). This includes the curtailment of the Kwinana refinery and an elevated capital expenditure (capex) program. Alumina owns 40% of AWAC; Alcoa Corp. (BB/stable/–) owns 60% and is the operator of AWAC. Importantly also, Alumina is under a takeover offer from Alcoa Corp,” S&P said in a press release.

Alumina relies on structurally subordinated dividends from AWAC means it may have to meet its share of the AWAC JV obligations with debt. “This could squeeze liquidity,” the agency warned.

The outlook reflects a one-in-three possibility of a downgrade given the continuing risks to liquidity and uncertainty regarding the recovery in AWAC cash flow and subsequent distributions to Alumina, S&P said.

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