Alcoa Debt Rating Lowered

On Oct. 3, 2002, Standard & Poor's lowered its long-term ratings on Alcoa (AA ) and affirmed its short-term ratings on the company. The company's corporate credit rating was lowered to 'A' from 'A+'. The rating action reflected reassessment of the company's financial policy in light of its recent announcements that it is increasing its holdings in Elkem ASA. The downgrade also reflects the likelihood that Alcoa's credit protection measures will not meet acceptable parameters for the former rating given the expectation of continued weakness in the economy and the decline in aluminum prices.

Alcoa's credit quality reflects its excellent business position as the largest integrated aluminum producer in the world, with broad product, business, and geographic diversity and efficient operations. The ratings also reflect its acquisitive growth strategy, the cyclicality of its end markets, low aluminum prices, and somewhat aggressive debt levels for the rating. In recent years, the company has pursued an ambitious growth strategy by pursuing internal expansion as well as strategic acquisitions with emphasis on upstream and downstream businesses.