Alcoa Bonds Face Cut to Junk as Ratings Firms Await Profit Gain Source: Lead Sto

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Alcoa Bonds Face Cut to Junk as Ratings Firms Await Profit Gain Source: Lead Story-Dateline: Lococo, Edmond and John Detrixhe, "Alcoa Bonds Face Cut to Junk as Ratings Firms Await Profit Gain," Bloomberg.com, /www.bloomberg.com/apps/news? kapos-4tt, posted 4/23/2010 Summary: Key Points in the Article Alcoa Inc. is threatened with a downgrade from the three major bond rating firms if the company fails to post earnings worthy of an investment grade rating. If the aluminum giant's rating falls it will increase future borrowing costs and reduce the companys "access to capital. The company's high debt level and the recession reduced demand for aluminum raised concerns about Alcoa's ability to service its debt. The company remains on a watch list for further downgrades after being cut to the lowest investment grade rating in February 2009 Alcoa currently has nearly $10 billion in debt with $666 billion coming due in one year. A number of analysts are recommending dumping outstanding Alcoa bonds in spite of inaction by rating agencies. Rating agencies have been Criticized for not being aggressive enough recently, particularly with large companies

Explanation / Answer

the answers in sequence are

1. option d. junk bond'

2. option c. downgrade

3. option b. interest rate

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