Summary
This 8-K filing by Alcoa Inc. (prior to its separation into two companies, which would later become Arconic and Alcoa Corporation, with the latter retaining the Alcoa name and this filing likely pertaining to the pre-split Alcoa) announces material amendments to its credit agreements in preparation for the company's separation into two distinct publicly traded entities. The key changes involve adjustments to financial covenants and credit facility amounts to accommodate this significant corporate restructuring. Specifically, Alcoa Inc. amended its existing Five-Year Revolving Credit Agreement to replace the Consolidated Net Worth covenant with a leverage ratio (Indebtedness to Consolidated EBITDA) that will decrease over time, and reduced the total commitment from $4 billion to $3 billion. Additionally, a new Secured Revolving Credit Agreement was established for its subsidiary Alcoa Upstream Corporation, providing up to $1.5 billion in revolving loans primarily for transaction costs related to the separation, working capital, and general corporate purposes. This new facility includes specific maturity dates and interest rate structures, along with detailed covenants and security arrangements to support the upcoming separation.
Key Highlights
- 1Alcoa Inc. amended its Five-Year Revolving Credit Agreement to facilitate a "Separation Transaction" (company split).
- 2The existing financial covenant based on Consolidated Net Worth is being replaced by a leverage ratio (Indebtedness/Consolidated EBITDA) starting at 5.50:1.00 and declining to 3.50:1.00 by December 31, 2019.
- 3The total commitments under the amended Alcoa Inc. credit agreement are permanently reduced from $4 billion to $3 billion.
- 4A new Secured Revolving Credit Agreement was entered into by Alcoa Upstream Corporation for up to $1.5 billion, to fund separation costs and general corporate needs.
- 5The new revolving credit facility has a maturity of five years from funding or December 31, 2021, with extension options.
- 6The new facility includes various interest rate options (adjusted LIBOR or base rate) and fees, with applicable margins tied to the leverage ratio.
- 7Both credit agreements contain customary covenants and events of default relevant to the ongoing corporate restructuring and future operations.