Alcoa sees cash balance of $2.5 billion after debt sale, divestiture

By Devika Patel

Knoxville, Tenn., April 16 – Alcoa Corp. lifted its cash balance to $2.5 billion at the end of the last quarter through a $500 million debt sale in early March and a divestiture that raised approximately $600 million at the end of March.

Since March, the company has used some of the cash to fund its U.S. pension plans and pay off its $750 million of 6¾% bonds due 2024, leaving no material debt maturities until 2026.

“First, in early March, we issued at 4 1/8%, $500 million of eight-year bonds maturing in 2029,” executive vice president and chief financial officer William F. Oplinger said on the company’s first quarter ended March 31 earnings conference call on Thursday.

“Second, at the end of March, we closed on the Warrick rolling mill sale to Kaiser Aluminum, generating cash proceeds of approximately $600 million.

“These two actions took our cash balance to $2.5 billion on March 31.

“Thirdly, on April 1, we funded $500 million into our U.S. pension plans and, lastly, on April 7, we called the entire $750 million of our 6¾% eight-year bonds maturing in 2024.

“On a pro forma basis, the net of these actions brings our cash balance to $1.3 billion, in line with our capital allocation framework target of retaining $1 billion cash on the balance sheet and eliminates all material debt maturities until 2026.

“These actions also significantly moved us toward meeting our adjusted proportional net debt target and created substantial pension funding flexibility,” he said.

Total debt as of March 31 was $3 billion and net debt was $492 million.

On March 8, Alcoa Nederland Holding BV priced a $500 million issue of eight-year senior notes (Ba1/BB+/BB+) at par to yield 4 1/8% in a drive-by.

The yield printed at the tight end of yield talk in the 4¼% area. Initial guidance was in the mid-4% area.

Left lead bookrunner Morgan Stanley & Co. LLC billed and delivered.

Alcoa Nederland, a Netherlands-based aluminum producer, earmarked the proceeds plus cash on hand to contribute approximately $500 million to the U.S. defined benefit pension plans applicable to salaried and hourly employees, and to pay off its 6¾% senior notes due 2024.

Alcoa is a Pittsburgh-based aluminum producer.

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