Alcoa closes $2.6 billion of bonds at up to 6.875% for the South32 deal, more than doubling its debt

Alcoa said on Wednesday it has closed a $2.6 billion bond sale to fund the cash part of its purchase of South32's bauxite, alumina and aluminum smelting interests. According to its Form 8-K, the sale has two parts:

Alcoa says the proceeds, together with cash on hand, will pay the roughly $3.1 billion cash portion of the South32 deal and related fees. At the same time, it cancelled the remaining commitments on the 364-day bridge loan it had lined up for the deal, according to the company's release. Alcoa shares closed at $44.06, down 1.5%, and Nasdaq put the company's market value at about $11.6 billion.

The number behind the number: the debt load more than doubles

Alcoa's second-quarter results showed total debt of $2.225 billion at June 30, with $1.35 billion of cash, for net debt of $873 million. The new notes alone are larger than that total debt. Adding the two together gives roughly $4.8 billion of debt, on our arithmetic, before any changes since June 30 or any debt that comes with the acquired businesses.

The interest bill changes even more. Alcoa reported $36 million of interest expense in the second quarter, about $144 million a year at that pace. The two new notes carry about $175 million of annual coupon between them, more than the whole current interest bill. The company can afford it on current earnings: second-quarter adjusted EBITDA excluding special items was a record $901 million, helped by strong aluminum prices. But aluminum earnings swing with the metal price, and the interest does not.

The price of the new money is also worth noting. In the second quarter, Alcoa redeemed the last $219 million of its 6.125% notes due 2028. It is now borrowing for longer at 6.625% and 6.875%, about 1.6 and 1.8 points above Wednesday's 7-year and 10-year Treasury yields. Most of that cost comes from the base rate: the 10-year Treasury yield is near its highest since 2007.

If the deal does not close

The deal still needs approval from South32's shareholders, regulatory clearances and other customary conditions. Alcoa's September 11 filing said South32 had released its notice of meeting for that vote. The notes include a special mandatory redemption: if the acquisition has not closed by June 29, 2027, or by any later date the parties agree, or if the deal is terminated first, Alcoa must buy back both series at 100% of face value plus accrued interest. If the deal fails, bondholders get their money back. Alcoa would have paid interest in the meantime, partly offset by what it earns on the unspent cash.

Who it hits

For aluminum buyers, the deal puts more bauxite, alumina and smelting capacity under one owner. For Alcoa shareholders, it means more earnings from more assets, but with more fixed costs ahead of them. For the bond market, it adds another large deal to a busy calendar at a time when, as we reported on today's 5-year auction, demand for Treasurys is already showing strain.

Sources: Alcoa Corporation Form 8-K and press release (Sept 23, 2026), Form 8-K/425 (Sept 11, 2026) and Q2 2026 earnings release (SEC EDGAR); U.S. Treasury; Nasdaq. Annual coupon, pro forma debt and spread figures calculated by The Company Chronicle. This is market information, not investment advice.