Significant Credit Rating Downgrade for Alcoa, Welcome to Junk Bonds

24/7 Wall St.

Pouring molten steelAlcoa Inc. (NYSE: AA) has just lost its investment grade corporate credit rating after a downgrade from Moody’s. The aluminum giant and DJIA component is now a junk bond rating as its unsecured credit rating was cut from the lowest investment grade rating of Baa3 down to Ba1. The outlook is now Stable, implying that the downgrade is now finished.

What is interesting about the downgrade is that the company wants to mention that this is based upon macroeconomic conditions. Moody’s expects that the debt/EBITDA ratio will remain elevated in both 2013 and in 2014. The ratings agency expects relatively weak aluminum prices for the next 12 to 18 months.

Moody’s first started this review back in December of 2013. The firm confirmed Alcoa’s Ba2 preferred stock rating, but Moody’s withdrew the company’s Prime-3 commercial paper rating and assigned a Speculative Grade Liquidity Rating of SGL-1.

Alcoa responded, “While we are…

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