Fitch Places National Steel's Notes on Rating Watch Negative.CHICAGO -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has placed the 'BB' foreign currency rating of National Steel S.A.'s (National Steel) US$450 million 9.875% perpetual notes on Rating Watch Negative. This rating action reflects the proposed plans by Companhia Siderurgica Nacional (CSN CSN Crosby, Stills, and Nash (band) CSN Centrala studiestödsnämnden (Swedish: state education grant and loan program) CSN Confédération des Syndicats Nationaux (French) ) to acquire the Corus Group Corus Group plc, normally referred to simply as Corus, is one of the world's largest producers of steel, headquartered in London. It was formed from the merger of Koninklijke Hoogovens N.V. Plc (Corus), a European steel producer for approximately US$8 billion (475 pence per ordinary share). CSN's offer follows an earlier proposal made by India-based Tata Steel Tata Steel, formerly known as TISCO (Tata Iron and Steel Company Limited), is a steel company based in Mumbai, India. Its main plant is located in Jamshedpur, Jharkhand, though with its recent acquisitions, the company has become a multinational with operations in Limited (Tata Steel) to acquire Corus for 455 pence per share. National Steel is a holding company that is 100% indirectly controlled by Brazil's Steinbruch family. National Steel's sole asset consists of 100% of the redeemable preferred shares Preferred shares Preferred shares give investors a fixed dividend from the company's earnings and entitle them to be paid before common shareholders. See: Preferred stock. of Acos. Acos, in turn, is a holding company that owns 100% of Vicunha. Vicunha is also a holding company that owns 42.74% of the common shares and controlling interest controlling interest The ownership of a quantity of outstanding corporate stock sufficient to control the actions of the firm. Controlling interest often involves ownership of significantly less than 51% of a firm's outstanding stock because many owners fail in Brazilian steel producer CSN. The 'BB' rating of National Steel's perpetual notes reflects the financial strength of CSN, Vicunha's sole operating subsidiary, and the expectation that CSN's future free cash flow available for dividends will be sufficient to allow National Steel to service its debt obligations. Dividend payments by CSN of approximately US$120 million per year should allow National Steel to meet expected annual debt-service obligations of about US$50 million. CSN's dividend payments in 2005 of US$961 million were above average. In 2004 and in 2003, CSN distributed dividends totaling US$242 million and US$278 million, respectively. National Steel's obligations are structurally subordinated to those of CSN, as its only source of income consists of the dividends received indirectly from CSN. Thus, the rating of National Steel's perpetual notes is linked to CSN's 'BBB-', Rating Watch Negative local currency Issuer Default Rating. The Negative Rating Watch of CSN's local currency rating reflects concern that if CSN is successful in its attempt to buy Corus a material amount of the transaction would be funded with CSN's cash and proceeds from additional debt. It also incorporates an expectation that CSN could raise the price it is willing to pay for Corus if Tata or another steel company makes another counteroffer In contract law, a proposal made in response to an original offer modifying its terms, but which has the legal effect of rejecting it. A counteroffer normally terminates the original offer, but the original offer remains open for acceptance if the counteroffer expressly . Fitch Rates CSN and related entities as follows: --Foreign currency and local currency Issuer Default Ratings (IDRs) 'BBB-'; --Unsecured debt obligations issued by CSN Islands entities 'BBB-'; --National scale rating and local debentures issuances 'AA(bra)'; CSN Export Trust --Series 2003-1 'BBB'; --Series 2004-1 'BBB'; --Series 2005-1 'BBB'. These ratings were placed on Rating Watch Negative on Nov. 17, 2006. Fitch rates Corus 'BB-' (currently on Rating Watch Negative) due to a financing structure proposed by Tata that would burden Corus with much of the acquisition debt. CSN is also expected to attempt to fund much of its proposed offer for Corus with non-recourse debt Non-Recourse Debt A loan that is secured by some sort of collateral, usually property. The issuer can seize the collateral if the borrower defaults. Notes: These types of projects are characterized by high capital expenditures, long loan periods, and uncertain revenue that would increase leverage at Corus. CSN and Corus together would rank among the largest global steel producers with annual steel production of 24 million tons. In addition, CSN expects to produce 50 million tons of iron ore annually by 2010. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
|
||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion