Aluminum giant Alcoa AA has declared that Alcoa Nederland Holding B.V., a fully-owned unit of Alcoa Upstream Corporation (Alcoa Corporation), which is currently a fully-owned subsidiary of Alcoa, has priced its proposed offering of $750 million aggregate principal amount of 6.75% senior notes due 2024 and $500 million aggregate principal amount of 7.00% senior notes due 2026.
The sale of the notes, which is subject to customary closing conditions, is expected to consummate on Sep 27, 2016.
The issuer (Alcoa Nederland Holding B.V.) of the notes plans to use the proceeds from the proposed offering to make a payment to Alcoa to fund the transfer of specific assets from Alcoa to the issuer in connection with Alcoa’s earlier announced plans to separate into two independent, publicly traded companies, and for general corporate purposes.
The net proceeds from the planned offering will be held in escrow until the completion of the proposed spilt and the satisfaction of specific other escrow release conditions. The notes will initially be guaranteed on a senior unsecured basis by Alcoa Corporation and, after the separation, by Alcoa Corporation and certain of its subsidiaries.
Alcoa’s shares rose roughly 1.1% to close at $9.78 yesterday.
Alcoa, in Sep 2015, declared the separation of its smelting and refining business from those that cater to aerospace and automotive markets. The separation will result in the creation of two stand-alone entities – Arconic Inc. and Alcoa Corporation.
Post separation, Alcoa Corporation will be a highly competitive leader in bauxite, alumina and aluminum production with a world-class asset base including the world’s biggest bauxite mining portfolio. It will also have the world’s largest alumina refining system. Roy Harvey, the incumbent President of Alcoa’s Global Primary Products business, will be the CEO of Alcoa Corporation.
On the other hand, Arconic will be a leading provider of high performance multi-material products and solutions in attractive markets including the fast-growing aerospace market. The aerospace market represents roughly 40% of the pro-forma revenues of this business. Alcoa's CEO Klaus Kleinfeld will lead Arconic as Chairman and CEO after the separation.
The separation will mark the completion of Alcoa’s multi-year transformation. The split will allow both companies to pursue their own independent strategies and provide shareholders with value-creating investment opportunities.
Alcoa is a Zacks Rank #3 (Hold) stock.
Other Stocks to Consider
Better-ranked companies in the mining space include Newmont Mining Corporation NEM, Coeur Mining, Inc. CDE and Eldorado Gold Corp. EGO. .
Newmont sports a Zacks Rank #1 (Strong Buy). The company has expected earnings growth of 91.3% for the current year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Coeur Mining, currently holding a Zacks Rank #2 (Buy), has expected earnings growth of roughly 145.6% for the current year.
Eldorado Gold has expected earnings growth of 140% for the current year. The stock carries a Zacks Rank #2.
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