Monday, April 26, 2010

Alcoa (NYSE:AA) Debt Going Junk?

Alcoa (NYSE:AA) is skating on thin ice with its debt rating, as the struggling maker of aluminum is, in the eyes of many onlookers, close to being downgraded to junk status on its debt.

This of course would make it even more difficult for the company as the cost of borrowing would rise, and in some cases lock them out from access to capital.

Those following the company say there is nothing in the earnings of Alcoa to justify them being designated as investment-grade on their debt, and so it's possible we could hear that they're downgraded sometime soon.

It probably won't be until sometime in 2011 or 2012 before that changes for them.

The company is trying to make a public case for its strong cash flow, which they say they will use to pay down the debt, but it remains to be seen if they've made their case or not.

An additional $50 million could be added to the cost of doing business for Alcoa if they are downgraded to junk status.

1 comment:

Anonymous said...

Short AA much? What is any of this based on?