US Steel was upgraded to BB- from B with a positive outlook reflecting “significant debt repayment over the near term, solid steel market conditions, including historically high steel prices.” These would result in significantly higher EBITDA generation and significantly lower leverage metrics as per Fitch. US Steel issued equity for $790mn along with $750mn in bonds during 1Q2021 to redeem all of its $1.056 bonds due 2025. The company also repaid an outstanding $500mn drawn on its $2bn ABL credit facility, $718mn of its 6.875% 2025s in Q3, $180mn of its 6.625% BRS notes due 2029 and its $370mn 6.25% 2026s. Fitch expects US Steel’s total debt/EBITDA to improve to below 2x by year end, from 2.9x in Q2. With HRC steel prices at historical highs, EBITDA in 1H2021 was more than $1.7bn, which was more than its $1.5bn EBITDA in the full-year 2018, ‘a high point in the cycle’. Also, its acquisition of Big River Steel (BRS) with a 49.9% stake, with BRS’s high EBITDA margins, driven by its flexible low-cost structure, should benefit US Steel’s cost position. Fitch views US Steel’s strategy to shift to lower costs and more efficient assets positively, adding that it will improve and further result in more stable margins.
US Steel’s bonds were unchanged – its 6.65% 2037s were at 108, yielding 5.86%.
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