Arconic cuts debt to $6.8 billion, has $1.8 billion cash at end of Q2

By Devika Patel

Knoxville, Tenn., July 24 – Arconic Inc. ended the second quarter with $1.8 billion of cash after reducing its debt in the quarter by $1.25 billion to $6.8 billion.

“In the quarter, we monetized the remainder of the Alcoa stake in an exchange for debt for a total debt reduction of $1.25 billion,” interim chief executive officer David P. Hess said on the company’s second quarter earnings conference call on Monday.

As a result of the debt reduction, gross debt was down $1.25 billion in the quarter from $8.1 billion at the end of the first quarter to $6.8 billion at the end of the second quarter.

The company also generated $91 million of free cash flow in the quarter to bring its quarter-ending cash balance to $1.8 billion, Hess said on the call.

Hess also distanced the company from responsibility for the June 14 fire at Grenfell Tower, a 24-story London public housing building, that left 80 people dead.

“The Grenfell Tower fire was a terrible tragedy,” Hess said.

“The leadership and the board of this company, in addition to myself, have spent a lot of time working to understand how our product was involved.

“Sixty different organizations were involved in the construction, management and/or refurbishment of the building.

“Reynobond panels were just one component in this complex supply system, which also included a number of components we did not manufacture.

“We supplied one of our products, Reynobond PE, to our customer, which used the product as one component of the overall cladding system on the Grenfell Tower,” he said.

Arconic’s cash balance at the end of the quarter was $1.8 billion.

Net debt to adjusted EBITDA is now below 3x, as the company finished the second quarter at 2.87x.

Consolidated adjusted EBITDA was $444 million, up 3% year over year.

On May 5, Arconic said it exchanged 12,958,767 shares of Alcoa Corp. common stock for $428,635,000 of Arconic debt held by Citigroup Global Markets Inc. and Credit Suisse Securities (USA) LLC.

Arconic also paid cash for the remaining debt held by Citigroup and Credit Suisse: $1,961,000 principal amount of its 6½% senior notes due 2018 and $79,517,000 principal amount of its 6¾% senior notes due 2018.

Arconic on April 24 announced that it purchased $44,974,000 of its 6½% senior notes due 2018 and $249,999,000 of its 5.72% senior notes due 2019 from Citigroup and Credit Suisse.

Citigroup and Credit Suisse had been conducting three separate cash tender offers for Arconic’s 6½% senior notes due 2018, 6¾% senior notes due 2018 and 5.72% senior notes due 2019.

Arconic is an aluminum company based in New York.

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