Alcoa extends revolver, amends facility for more covenant flexibility

By Marisa Wong

Morgantown, W.Va., Nov. 16 – Alcoa Corp. amended and restated on Nov. 14 its revolving credit agreement dated Sept. 16, 2016 for improved terms, according to an 8-K filing with the Securities and Exchange Commission.

The amendment extends the maturity date of the credit facility to Nov. 14, 2022 from Nov. 1, 2021.

The aggregate amount of commitments remains at $1.5 billion. The amended credit agreement permits the borrower to request additional tranches of term loans or increase the total amount of revolving commitments, in an aggregate principal amount of up to $500 million.

Borrowings still bear interest at Libor plus an applicable margin based on the company’s leverage ratio, but the pricing categories were adjusted and now range from 175 basis points to 250 bps.

In addition, the pricing tiers for the commitment fee were modified and now range from 22.5 bps to 45 bps.

The amended credit agreement contains customary affirmative covenants, negative covenants and events of default substantially comparable to the original credit agreement. However, it provides additional flexibility, in some cases based on financial ratios, for the company to make restricted payments such as dividends and share buybacks, to make investments, to incur debt and otherwise to operate in the ordinary course.

Financial covenants require the maintenance of a specified interest expense coverage ratio of not less than 5 times and a leverage ratio for any period of four consecutive fiscal quarters that is not greater than 2.25 times; under the amended agreement, the leverage ratio may be increased to a level not higher than 2.5 times in some cases.

The amended agreement also permits restricted payments in an aggregate amount not to exceed $100 million during any fiscal year (beginning with 2017), with 50% of any unused amount of that base amount from any fiscal year available for use in the next year. In addition, if certain financial ratios are met as of the end of the prior fiscal year, restricted payments of up to an additional $250 million are permitted during any year, with 50% of any unused amount of the base amount from any year available for use in the next year.

Under the amended credit agreement, the general investment basket was increased to an aggregate amount not to exceed $400 million. Also, if certain financial ratios are met as of the end of the prior fiscal year, investments of an additional $200 million per year are permitted during any fiscal year, with 50% of any unused amount of that base amount from any year available for use in the following year.

The general debt basket was doubled in size, not to exceed the greater of $1 billion and 6% of consolidated total assets.

Additional flexibility was added for investments and debt in the ordinary course, the filing noted.

JPMorgan Chase Bank, NA is the administrative agent.

Alcoa is an aluminum company based in Pittsburgh.

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