Moody's downgrades Alcoa to 'junk' status
Moody's downgrades Alcoa to 'junk' status on weaker aluminum prices and industry conditions
NEW YORK (AP) -- Moody's Investors Service downgraded Alcoa Inc.'s credit rating into junk status Wednesday, citing lower aluminum prices.
Moody's said Alcoa has reduced costs and made itself more productive, but difficult industry trends and decreased aluminum prices will make it hard for the aluminum smelter and parts-maker to make its credit measurements investment-grade in 2013 or 2014.
Analyst Carol Cowan lowered her rating on Alcoa to 'Ba1' from 'Baa3'. 'Ba1' is the highest non-investment grade or "junk" status rating, and 'Baa3' is the lowest investment-grade rating. The ratings apply to $8.6 billion in debt, and Moody's said its outlook on Alcoa is stable.
Alcoa said it is disappointed with the downgrade but will stick with its business strategy. It said it believes the ratings change reflects challenging macroeconomic conditions and volatile metal prices rather than Alcoa's financial and operating position.
In April Alcoa reported lower-than-expected first-quarter revenue, and earlier this month the company said it will close down two production lines at a plant in Canada and cut about 500 jobs there because of lower aluminum prices. The company has seen strong demand for aluminum, but prices have fallen.
Shares of Alcoa lost a penny to $8.58 Wednesday and fell 6 cents to $8.52 in aftermarket trading.
