Rating Action: Moody's downgrades Alcoa's ratings, assigns Ba1 CFR; outlook

stable

Global Credit Research - 29 May 2013

Approximately $8.6 billion of debt downgraded

NOTE: On June 26, 2013, the press release was revised as follows: In the debt list, corrected ratings on the

Multiple Seniority Shelf Feb 17, 2014 and Senior Unsecured Medium-Term Note Program to (P)Ba1 from (P)Ba1

LGD4, 54%. Revised release follows.

New York, May 29, 2013 -- Moody's Investors Service downgraded the senior unsecured debt ratings of Alcoa

Inc. ("Alcoa") to Ba1 from Baa3 and assigned a Ba1 Corporate Family Rating and a Ba1-PD Probability of Default

Rating. Moody's confirmed the Ba2 preferred stock rating. At the same time, Moody's withdrew the company's

Prime-3 commercial paper rating and assigned a Speculative Grade Liquidity Rating of SGL-1. This concludes the

review for downgrade initiated on December 18, 2012. The rating outlook is stable.

Downgrades:

..Issuer: Alcoa Inc.

....Multiple Seniority Shelf Feb 17, 2014, Downgraded to (P)Ba1 from (P)Baa3

....Senior Unsecured Conv./Exch. Bond/Debenture Mar 15, 2014, Downgraded to Ba1 LGD4, 54% from Baa3

....Senior Unsecured Medium-Term Note Program, Downgraded to (P)Ba1 from (P)Baa3

....Senior Unsecured Regular Bond/Debenture Jan 15, 2028, Downgraded to Ba1 LGD4, 54% from Baa3

....Senior Unsecured Regular Bond/Debenture Jun 15, 2018, Downgraded to Ba1 LGD4, 54% from Baa3

....Senior Unsecured Regular Bond/Debenture Feb 1, 2027, Downgraded to Ba1 LGD4, 54% from Baa3

....Senior Unsecured Regular Bond/Debenture Feb 23, 2019, Downgraded to Ba1 LGD4, 54% from Baa3

....Senior Unsecured Regular Bond/Debenture Feb 23, 2022, Downgraded to Ba1 LGD4, 54% from Baa3

....Senior Unsecured Regular Bond/Debenture Feb 1, 2017, Downgraded to Ba1 LGD4, 54% from Baa3

....Senior Unsecured Regular Bond/Debenture Feb 1, 2037, Downgraded to Ba1 LGD4, 54% from Baa3

....Senior Unsecured Regular Bond/Debenture Jul 15, 2013, Downgraded to Ba1 LGD4, 54% from Baa3

....Senior Unsecured Regular Bond/Debenture Jul 15, 2018, Downgraded to Ba1 LGD4, 54% from Baa3

....Senior Unsecured Regular Bond/Debenture Aug 15, 2020, Downgraded to Ba1 LGD4, 54% from Baa3

....Senior Unsecured Regular Bond/Debenture Apr 15, 2021, Downgraded to Ba1 LGD4, 54% from Baa3

..Issuer: Chelan County Development Corporation, WA

....Senior Unsecured Revenue Bonds Dec 1, 2031, Downgraded to Ba1 LGD4, 54% from Baa3

..Issuer: Iowa Finance Authority

....Senior Unsecured Revenue Bonds Aug 1, 2042, Downgraded to Ba1 LGD4, 54% from Baa3

Assignments:

..Issuer: Alcoa Inc.
.... Corporate Family Rating, Assigned Ba1

.... Probability of Default Rating, Assigned Ba1-PD

.... Speculative Grade Liquidity Rating, Assigned SGL-1

Outlook Actions:

..Issuer: Alcoa Inc.

....Outlook, Changed To Stable From Rating Under Review

Confirmations:

..Issuer: Alcoa Inc.

....Pref. Stock Preferred Stock, Confirmed at Ba2, LGD6, 97%

Withdrawals:

..Issuer: Alcoa Inc.

.... Commercial Paper, Withdrawn , previously rated P-3

....Senior Unsecured Commercial Paper, Withdrawn , previously rated P-3

The downgrade to a Ba1 Corporate Family Rating reflects our expectations that, despite Alcoa's success in

reducing costs and improving productivity, continued headwinds pressuring fundamentals in the aluminum industry

and aluminum prices , and most specifically the level of performance improvement that can be achieved in the

primary segment, will continue to push out the time frame in which debt protection metrics appropriate for an

investment grade rating can be achieved. We believe this is likely to continue through 2013 and 2014. Key debt

protection metrics such as Ebit/interest and debt/EBITDA at 1.2x and 5.3x respectively for the twelve months

through March 31, 2013 remain weak for an investment grade rating as does the (operating cash flow less

dividends)/debt ratio of 13.7%. While the company's efforts to improve performance in its alumina and aluminum

business are evidencing a degree of success, the full improvement to targeted levels in terms of moving down the

cost curve is expected to be achieved by 2015. In addition, although aluminum demand has evidenced year-onyear improvement of approximately 7% to 7.5 % from 2010 through 2012, the aluminum price has been in a

downward decline since reaching post recession highs in 2011. Currently LME aluminum prices are ranging in the

low $0.80/lb and there appears little catalyst for upward movement.

Chinese growth is slowing as evidenced by its first quarter 2013 GDP growth of 7.7% and more recent flash

reports of further slowing while the PMI index in the US is evidencing a weakening trend and much of Europe

remains in recession. While pockets of strength are evidenced, most notably in the automotive and aerospace

industries, these are not viewed sufficient for a broad based global recovery in the aluminum industry and

significant profitability recovery. Although Alcoa's mid stream business (Global Rolled Products) is expected to

show improvement and its downstream Engineered Products and Solutions (EPS) business is well positioned,

these segments are currently not able to offset the slow profit improvement in the primary business at current debt

levels. At adjusted debt levels of approximately $13.3 billion, pro-forma for the repayment of the July 2013 debt

maturity, EBITDA needs to reach a run rate of approximately $3.8 billion inorder to achieve more reasonable

metrics. Conversely, at a $3 billion EBITDA level, debt would need to reduce by approximately $2.8 billion.

While the company is evidencing success in slightly improving performance at lower price points, given industry

dynamics we believe the achievement of metrics appropriate for an investment grade rating remains beyond the

rating horizon. We expect leverage, as measured by the debt/EBITDA to remain elevated in 2013 and 2014 and

EBIT/interest to remain below 2x during this same time period although evidencing a gradual but improving trend.

RATINGS RATIONALE

Alcoa's rating considers its position as one of the largest integrated aluminum producers globally, holding a

commanding position in the alumina industry, a leading position as a provider of primary aluminum, and important

positions in a wide variety of markets served by its midstream (Global Rolled Products - GRP) and downstream

(EPS) segments. Factored into the rating is the focus the company continues to maintain on cost reduction and

cost control, as well as working capital management and productivity, particularly in the smelting system. The
rating also reflects current challenges in both the alumina and aluminum markets where prices continue to trend

below 2012 levels and global overcapacity remains. While various companies in the industry have announced

smelter capacity curtailment or are reviewing smelter curtailments, including Alcoa, there remains a significant

amount of lower cost capacity targeted to come on stream for a net increase in capacity over the next several

years. In addition, inventory levels on the LME remain high and we expect that, at some point, this metal will find its

way to the market. These factors are incorporated in the rating.

Although we expect cost creep in various input costs such as energy and caustic soda, a significant portion of

savings achieved in recent years, particularly in the smelting system, is believed sustainable, better positioning the

company for improvement in earnings and cash flow generation over the medium term. However, recovery in the

aluminum industry remains slow and uneven, including in the U.S., which typically accounts for at least 50% of

Alcoa's revenues. Improved volumes and prices are necessary for sustainable strengthening in performance and

stronger metrics.

The company's excellent liquidity and manageable near-term debt maturities are also important considerations in

the rating.

The senior unsecured ratings are at the corporate family rating reflecting the absence of secured debt in the capital

structure. If this were to change the unsecured ratings could be adversely impacted.

The stable outlook reflects our expectation for relatively weak aluminum prices over the next twelve to eighteen

months and gradual performance in Alcoa's debt protection metrics. The outlook also captures the company's

focus on driving down costs, managing working capital, sound liquidity position and manageable debt maturities.

The rating could be upgraded should Alcoa achieve a sustainable debt/EBITDA ratio of at least 3.5x, a sustainable

EBIT/interest ratio of at least 4x and a sustainable (Cash flow less dividends)/debt ratio of at least 20%.

The rating could be downgraded should debt protection metrics trend below current levels or liquidity contract

materially.

The principal methodology used in this rating was the Global Mining Industry Methodology published in May 2009.

Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the

U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a

copy of these methodologies.

Headquartered in New York City, New York, Alcoa is a leading global integrated aluminum producer active in all

major aspects of the industry, including the mining of bauxite, refining into alumina, smelting and recycling.

Through its Global Rolled Products and Engineered Products and Solutions segments, the company provides

value added products to a diversity of end markets. Revenues for the twelve months through March 31, 2013 were

approximately$23.5 billion.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory

disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class

of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance

with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain

regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating

action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings,

this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in

relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where

the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner

that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for

the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating

action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will

be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to

jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal

entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for

each credit rating.

Carol Cowan

VP - Senior Credit Officer

Corporate Finance Group

Moody's Investors Service, Inc.

250 Greenwich Street

New York, NY 10007

U.S.A.

JOURNALISTS: 212-553-0376

SUBSCRIBERS: 212-553-1653

Brian Oak

MD - Corporate Finance

Corporate Finance Group

JOURNALISTS: 212-553-0376

SUBSCRIBERS: 212-553-1653

Releasing Office:

Moody's Investors Service, Inc.

250 Greenwich Street

New York, NY 10007

U.S.A.

JOURNALISTS: 212-553-0376

SUBSCRIBERS: 212-553-1653

© 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights

reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. ("MIS") AND ITS AFFILIATES ARE

MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT

COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH

PUBLICATIONS PUBLISHED BY MOODY'S ("MOODY'S PUBLICATIONS") MAY INCLUDE MOODY'S

CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS,

OR DEBT OR DEBT-LIKE SECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN

ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY

ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY

OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE

VOLATILITY. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE

NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND MOODY'S

PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND

CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE

RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT

RATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR

ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY'S

PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE

ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR

PURCHASE, HOLDING, OR SALE.
ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO,

COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE

REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED,

REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN

WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON

WITHOUT MOODY'S PRIOR WRITTEN CONSENT. All information contained herein is obtained by MOODY'S

from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as

well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind.

MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient

quality and from sources Moody's considers to be reliable, including, when appropriate, independent third-party

sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate

information received in the rating process. Under no circumstances shall MOODY'S have any liability to any

person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to, any error

(negligent or otherwise) or other circumstance or contingency within or outside the control of MOODY'S or any of

its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis,

interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special,

consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if

MOODY'S is advised in advance of the possibility of such damages, resulting from the use of or inability to use,

any such information. The ratings, financial reporting analysis, projections, and other observations, if any,

constituting part of the information contained herein are, and must be construed solely as, statements of opinion

and not statements of fact or recommendations to purchase, sell or hold any securities. Each user of the

information contained herein must make its own study and evaluation of each security it may consider purchasing,

holding or selling. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS,

COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH

RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR

MANNER WHATSOEVER.

MIS, a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most

issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and

preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating

services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies

and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain

affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from

MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually

at www.moodys.com under the heading "Shareholder Relations — Corporate Governance — Director and

Shareholder Affiliation Policy."

For Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services

License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or

Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended

to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By

continuing to access this document from within Australia, you represent to MOODY'S that you are, or are

accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you

represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of

section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a

debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to

retail clients. It would be dangerous for retail clients to make any investment decision based on MOODY'S credit

rating. If in doubt you should contact your financial or other professional adviser.