Corporate Debt Restructuring Masterclass

18 July 2022 (Mon), 5pm Singapore/HK time

Fitch revised its rating on US Steel’s 6.875% unsecured bonds due 2025 to CCC+/RR5 from CCC/RR6 on Monday. The upgrade comes as the company has issued new debt of $500mn and equity worth ~$700mn, the proceeds to be used to redeem 35% of the secured notes due 2025 and for general purposes, possibly including repayment of debt. The rating agency has also affirmed the long term Issuer Default Rating of US Steel at B- and the ABL credit facility and secured notes at BB-/RR1. The outlook for the American integrated steel producer has been revised to Stable from Negative on the back of growth in the steel market as well as due to improved liquidity due to the ~$700n equity offering. Additionally, the takeover of Big River Steel by the Pittsburgh-headquartered company for $774mn with cash on hand will lower the company’s overall cost position. According to the rating agency, US Steel has good liquidity and had ~$1.7bn in cash and cash equivalents, $1.006bn of ABL credit and $162mn USSK credit available to it as on September 30. The steel sector in the US has started growing steadily aided by faster than anticipated recovery in autos. While revising the outlook upwards, Fitch also cautioned that the Total debt/EBITDA has risen last year due to the higher borrowing and reduced earnings due to the pandemic slowdown, which is expected to reduce this year as the economy resurges.
US Steel’s 6.25% 2026s and 6.875% 2025s and were up 1.0 and 0.94 to trade at 99.4 and 101.2 while its 6.65% 2037s were down 0.29 to trade at 96.96 on the secondary markets.
 
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