S&P: Alumina placed on negative CreditWatch

Aluminium producer Alumina has had its A- long-term credit rating placed on negative CreditWatch by ratings agency Standard & Poor's, following US giant Alcoa Inc's hostile bid for Canadian rival Alcan Inc.

Standard & Poor's said Alumina was on CreditWatch with "negative implications" because it expected Alumina could be involved in purchasing new Alcoa World Alumina and Chemicals (AWAC) assets.

Alumina owns 40 per cent of AWAC, the world's largest alumina business, with partner Alcoa owning the other 60 per cent.

If Alcoa's $US33 billion ($A40.26 billion) unsolicited bid is successful, the AWAC joint venture will be offered Alcan's bauxite and alumina assets, with Alumina having the option of acquiring a 40 per cent share, the agency said.

"Alumina's share of funding for these new AWAC assets could be significant and may stress the company's capital structure," Standard & Poor's credit analyst Peter Stephens said.

"The Alumina rating will also be affected if the Alcoa ratings are lowered significantly because of the strong links between the companies."

Standard & Poor's said Alumina's rating could come under pressure if the proposed takeover adversely affected AWAC's operating and financial performance, or led to a change in AWAC's dividend policy that substantially reduced cash flows to Alumina.

Alcoa's ability to manage AWAC's expansion projects within cost parameters, and successfully commission them on a timely basis, were also relevant factors, the agency said.

Alcoa believes swallowing up Alcan would create a "premier" global leader in the sector.

The world's second-largest aluminum company has offered $US73.25 ($A88.93) per share for Alcan, a 32 per cent premium to Alcan's closing price on Friday.

Alcoa's chairman and chief executive, Alain Belda,said the hostile bid followed nearly two years of discussions between the two firms on a tie-up that had failed.

Standard & Poor's said it would continue to monitor takeover bid and update the CreditWatch as new information became available.

At 1518 AEST, Alumina's shares were up 27 cents at $7.60.