8-KRegulation FDOther EventsExhibits & Filings

Howmet Aerospace Inc. 8-K Report, Regulation FD Disclosure (Feb 7, 2020)

Filed February 7, 2020For Securities:HWM

Summary

This 8-K filing announces Arconic Inc.'s subsidiary, Arconic Rolled Products Corporation (Arconic Corporation), has closed an offering of $600 million in aggregate principal amount of 6.125% Senior Secured Second-Lien Notes due 2028. The net proceeds from this offering, along with additional funds, are earmarked for a distribution of Arconic Corporation's shares to Arconic Inc. stockholders following the separation of the rolled aluminum products, aluminum extrusions, and architectural products operations. The funds are currently held in escrow, with specific conditions and timelines governing their release or a potential special mandatory redemption of the notes. The notes are secured on a second-priority basis, subordinate to existing first-priority liens under the Senior Credit Facilities. The filing details various covenants, redemption provisions, and events of default associated with these notes. Investors should note the strategic importance of this financing in facilitating a significant corporate separation and distribution, while also being aware of the leverage implications and the subordinate nature of these second-lien notes in the capital structure.

Key Highlights

  • 1Arconic Corporation, a subsidiary of Arconic Inc., completed a $600 million offering of 6.125% Senior Secured Second-Lien Notes due 2028.
  • 2Proceeds from the notes offering will support a separation and distribution of Arconic Corporation's operations to Arconic Inc. stockholders.
  • 3Funds are held in escrow, with a special mandatory redemption provision if the separation/distribution is not completed by August 1, 2020.
  • 4The notes are secured on a second-priority lien basis, subordinate to obligations under Senior Credit Facilities.
  • 5The Indenture includes covenants restricting certain actions, such as making investments, incurring additional debt, and disposing of assets.
  • 6A change of control event would trigger an offer to repurchase the notes at 101% of the principal amount.
  • 7Arconic Corporation may redeem notes under specified conditions, including "make-whole" provisions and using proceeds from certain equity offerings or asset sales.

Frequently Asked Questions

The main purpose of this filing is to announce the closing of a $600 million offering of Senior Secured Second-Lien Notes by Arconic Corporation, a subsidiary of Arconic Inc. This financing is crucial for facilitating a planned separation and distribution of certain business operations to Arconic Inc.'s stockholders.

The net proceeds from the offering, along with an additional cash amount, are held in escrow. These funds, along with borrowings under Senior Credit Facilities, will be used to distribute cash to Arconic Inc. in connection with the separation and distribution of Arconic Corporation's shares to stockholders. The funds will be released from escrow upon the satisfaction of certain conditions.

If the separation and distribution are not completed by August 1, 2020, or if other escrow release conditions are not met, Arconic Corporation will be required to redeem the notes through a Special Mandatory Redemption. The redemption price will be 100% of the principal amount if the redemption occurs on or before June 6, 2020, and 101% of the principal amount if it occurs after June 6, 2020, plus accrued interest.

The notes are secured by second-priority liens on the assets of Arconic Corporation and the guarantors. These liens are expressly junior in priority to all liens securing the Senior Credit Facilities and any future first-priority lien debt. This means that holders of first-priority lien debt will be paid in full before any proceeds from collateral realization can be applied to the second-lien notes.