Dow Jones Listed Producer Eyes Swap
Alcoa, an aluminum producer with more than USD20 billion in annual revenue, may enter an interest-rate swap following its recent two-part USD1.4 billion bond sale. William Plummer, treasurer in New York, said, "We are considering the fixed-versus-floating of this new debt issue because in the current market environment with a steep yield curve, floating is attractive." In any swap, the Pittsburgh-based company would seek to pay a spread over LIBOR and receive the fixed-rate coupons on the bond.
The bond sale comprised of USD800 million in five-year debt priced with a 4.25% coupon and USD400 million of 10-year debt with a 5.375% coupon. Credit Suisse First Boston and Morgan Stanley led the deal.
Plummer said the company has used interest-rate swaps in the past and that there "certainly are a lot of arguments for doing it again now, and we will make a decision at some point and [perhaps] execute it." However, he declined to say what factors would influence the company to enter a swap or not, saying he did not want to tip his hand to the market. Plummer declined further comment relating to the company's strategic plans, although he noted it monitors the credit derivatives market but has not used the product and does not have any current need to do so.
Moody's Investors Service rates Alcoa A2 and Standard & Poor's rates it A plus.