Usiminas, CSN ratings downgraded by S&P

Credit rating agency Standard & Poor's (S&P) has downgraded the ratings of Brazilian steelmakers Companhia Siderúrgica Nacional (CSN) and Usiminas.

As for CSN, S&P lowered the company’s global scale corporate credit ratings
to B from B+, while the company’s national scale ratings were downgraded to brBB- from brBBB-. At the same time, the credit rating agency lowered the issue-level ratings on
CSN's senior unsecured debt to B' from B+. The company’s outlook on the corporate
credit ratings is negative, S&P said.

“The negative outlook reflects our view that weak industry activity in Brazil,
combined with CSN's high interest burden, are likely to continue to consume
cash over the next 12 months,” S&P said.

“We believe that current market conditions may hinder CSN's ability to increase prices, and may lead to further cash flow pressures, likely affecting CSN's liquidity,” it noted.

As for its peer Usiminas, the credit rating agency lowered the company’s global scale corporate credit rating to SD from CCC+, and its national scale rating to 'SD' from 'brCCC+'. The issue-level rating on Usiminas’ senior unsecured debt was downgraded to C from CCC, at the same time its national scale issue-level rating assigned to the company's senior unsecured debentures went to brC from brCCC.

“The downgrade on the issuer credit rating follows Usiminas' announcement that it has reached a standstill agreement with the banks that hold most of its debts, as part of a restructuring process that includes a BRL 1 billion capital injection from its shareholders,” S&P clarified.

Commenting Usiminas’ move, S&P labeled the deal as “a negotiation under distress, and thus tantamount to default.”