Chicago 29/06/2016 - Alcoa said as part of its split between an upstream and downstream business that it will issue $1 billion of new debt for the smelting business to ease the existing $8 billion debt burden on the remaining company, the company announced in an SEC filing Wednesday morning.
The upstream company, which will retain the Alcoa name, will comprise five business units that make up global primary products - bauxite, alumina, aluminium, casting and energy.
The downstream company will be called 'Arconic'. It will be a value-added venture that includes divisions for global rolled products, engineered products and transportation and construction.
The company stated that 80.1 percent of the spun-off company will be distributed to shareholders and that 19.9 percent of the spun-off upstream business will be owned by Arconic.
Additionally, Alcoa said it would issue roughly $1 billion of debt through term loans and notes, paying a "substantial portion" of the proceeds to Arconic, therefore reducing the burden on the remaining company.
Roughly half of the existing $5 billion in person obligations will also be shouldered by the new company.
Aloca's chairman and CEO Klaus Kleinfeld is attempting to maintain Alcoa's investment rating, which is currently split between one investment-grade and two junk levels.
"As independent entities, each company will be positioned to capture opportunities in increasingly competitive and rapidly evolving markets, and to pursue their own independent strategies," Kleinfeld said.
Originally announced in September 2015, the transformation of the 128-year old company was made in response to the the price of aluminium collapsing more than 50 percent from its 2008 peak.
Leadership for the individual companies will be divided between the existing executives at Alcoa.
Arconic Inc will use the stock symbol ARNC with the upstream unit traded under the name Alcoa Corporation from Alcoa Upstream Corporation.
The company is applying for authorization to list its common stock under the symbol 'AA', while each business will maintain a presence in New York, where Alcoa is headquartered and Pittsburgh – the site of the main operations center.
Alcoa share prices on the New York Stock Exchange were last down 21 cents or 2.3 percent to $9.12.
(Editing by Tom Jennemann)