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Alcoa Offers Further Details On Its Proposed Business Spin

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Alcoa Offers Further Details On Its Proposed Business Spin

Shares of Alcoa Inc (NYSE: AA) were trading lower by more than 2 percent on Wednesday after the company provided an update on its proposed spin-off of its business.

Alcoa announced back in September 2015 it will split its Value-Add and Upstream businesses into two separate public companies by the end of 2016.

Related Link: Citi Skeptical Of Alcoa Split: Are There Benefits?

Alcoa said Wednesday in a regulatory filing that the new mining and smelting company will continue operating under the name Alcoa. The smelting business, to be named Arconic, will take on $1 billion in new debt.

The new Alcoa will pass on a "substantial portion" of the $1 billion in new debt and the new Alcoa will also assume almost half of the pension obligations. Alcoa will assume $2.6 billion of the $5.6 billion in pension and related obligations in the business split.

Arconic will also hold a stake of up to 19.9 percent in the new Alcoa.

According to Bloomberg, Alcoa's CEO Klaus Kleinfeld said on a conference call Wednesday morning that his target is for Arconic to at least retain Alcoa's ratings which are divided between one investment-grade and two junk levels.

 

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