Alcoa 2013 Annual Report Download - page 87

In summary, at December 31, 2013, Alcoa has ten revolving credit facilities (excluding the Credit Facility above),
providing a combined capacity of $1,190, of which $1,040 is due to expire in 2014 and $150 is due to expire in 2015.
In February 2011, Alcoa filed an automatic shelf registration statement with the Securities and Exchange Commission
for an indeterminate amount of securities for future issuance. This shelf registration statement replaced Alcoa’s
existing shelf registration statement (filed in March 2008). As of December 31, 2013 and 2012, $1,250 in senior debt
securities were issued under the current shelf registration statement.
Alcoa’s cost of borrowing and ability to access the capital markets are affected not only by market conditions but also
by the short- and long-term debt ratings assigned to Alcoa’s debt by the major credit rating agencies.
On April 11, 2013, Fitch Ratings (Fitch) affirmed the following ratings for Alcoa: long-term debt at BBB- and short-
term debt at F3. Additionally, Fitch changed the current outlook from stable to negative.
On April 26, 2013, Standard and Poor’s Ratings Services (S&P) affirmed the following ratings for Alcoa: long-term
debt at BBB- and short-term debt at A-3. Additionally, S&P changed the current outlook from stable to negative.
On May 29, 2013, Moody’s Investors Service (Moody’s) downgraded the following ratings for Alcoa: long-term debt
from Baa3 to Ba1 and short-term debt from Prime-3 to Speculative Grade Liquidity Rating-1. Additionally, Moody’s
changed the current outlook from rating under review to stable.
The following is a summary of Alcoa’s liquidity position as it relates to the ratings downgrade by Moody’s.
Cash and letters of credit. As a result of the ratings downgrade by Moody’s, certain power companies and
counterparties to derivative contracts required Alcoa to post letters of credit and cash collateral, respectively, in the
amount of $167 and $18, respectively, in June 2013. During the remainder of 2013, the amount of letters of credit
posted increased by $2 and the amount of cash collateral posted declined to $6. Other vendors and third-parties may
require Alcoa to post additional letters of credit and/or cash collateral in future periods.
Outstanding debt. Alcoa’s outstanding debt as of December 31, 2013 totaled $8,319. There were no ramifications to
Alcoa as a result of the ratings downgrade and interest payments and fees related to the outstanding debt remain
unchanged.
Revolving credit facilities. Alcoa has a $3,750 revolving credit facility that expires in July 2017 and ten other
revolving credit facilities totaling $1,190. This $4,940 of borrowing capacity was also unaffected by the ratings
downgrade, including the margins that would be applicable to any borrowings, and remains available for use by Alcoa
at its discretion.
Commercial paper. During the seven months since the downgrade, Alcoa was able to issue the desired level of
commercial paper to support operations without difficulty. At the time of the downgrade, the spreads on commercial
paper increased slightly, however, by one to three basis points, which did not result in a significant change to Alcoa’s
total interest costs. While Alcoa expects it can continue to issue commercial paper, there is no assurance about the
amount or cost at which it could issue commercial paper.
Investing Activities
Cash used for investing activities was $1,290 in 2013 compared with $759 in 2012 and $1,852 in 2011.
The use of cash in 2013 was primarily due to $1,193 in capital expenditures (includes costs related to environmental
control in new and expanded facilities of $143), 34% of which related to growth projects, including the automotive
expansion at the Davenport, IA fabrication plant, the aluminum-lithium capacity expansion at the Lafayette, IN plant,
and the automotive sheet expansion at the Alcoa, TN plant; and $293 in additions to investments, including equity
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