ArcelorMittal's ratings lowered to junk grade by S&P

Discussion in 'Europe and Russia' started by Yusuf, Aug 3, 2012.

  1. Yusuf

    Yusuf GUARDIAN Administrator

    Mar 24, 2009
    Likes Received:
    Hahahha. And this whiner Mittle keeps cribbing about India. No wonder he wants south concessions. He can't get enough money :troll:

    MUMBAI: In a move that will have implications on ArcelorMittal's fund raising abilities, rating agency Standard & Poor's has downgraded
    Lakshmi Mittal led steel group to below junk grade.

    "We are lowering the long- and short-term ratings on ArcelorMittal to 'BB+/B' from 'BBB-/A-3'. ?The negative outlook reflects the uncertainty related to the extent of the company's planned near-term debt reduction as well as the weak steel environment" S&P said in a statement on Friday. The lowest level for an investment grade rating assigned by S&P is BBB any rating below BBB is considered sub-investment grade. In industry parlance, bonds with a sub-investment grade rating are described as 'junk' bonds and these bonds only sell if they provide a high return.

    According to S&P the downgrade reflects the weaker steel industry environment and economic prospects globally, and particularly in Europe which has led the company to revise downward its forecast for ArcelorMittal's profits for the rest of 2012 and 2013. "Our rating action follows the recent change in Standard & Poor's economic forecast for Europe. In addition, purchasing manager indices for other parts of the world have weakened, which we believe should translate into lower steel demand in 2012-2013," S&P said pointing out that the 20% decline in steel and raw material prices over the past two months indicates that the industry environment is currently weaker than we previously expected.

    Finally, the downgrade also follows ArcelorMittal's second-quarter results, which were somewhat below our expectations as of May 2012. "We now expect that the company's adjusted ratio of funds from operations (FFO) to debt will be below 20% in 2012 and about 20% in 2013 according to our scenario, compared with our previous forecast of 25% in 2013" the statement said.

    A further slowdown in steel demand in China and consequently weaker iron ore prices may also have a major negative effect on the company's profits because mining represents an estimated 30% of its earnings before interest tax and depreciation. Under S&P's base-case scenario, ArcelorMittal will generate adjusted FFO of about $4.0 billion-$4.5 billion in 2012. Taking into account the working capital inflow of $1.1 billion in the first half of this year, operating cash flow should cover capital expenditures of $4.5 billion and dividends of $1.2 billion.

    The Times of India on Mobile
  3. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

    Dec 17, 2009
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    As China's economy tanks they dump more steel on the open market. Now we see countries putting tariffs on Chinese steel.
    Oracle likes this.
  4. pmaitra

    pmaitra Moderator Moderator

    Mar 10, 2009
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    EST, USA
    Let's keep this Standard and Poor metaphor out of this. What do they do anyway? Just sit around, fudge numbers, and publish 'ratings.'

    No wonder the world is in such a mess. It's about time S&P, IMF, and the ilk were kicked to the curb.
    Mr.Ryu likes this.
  5. Iamanidiot

    Iamanidiot Elite Member Elite Member

    Dec 21, 2009
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    I empathise with mittal.The steel industry is absolutely unforgiving.Bottomlines are more important in the steel industry

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