CSN Bonds Tumble to Record as Distressed Steelmaker’s Debt Grows

Bonds of Cia. Siderurgica Nacional SA, the worst performer among junk-rated raw-material suppliers in emerging markets, fell to a record low as its debt burden mounted.

Bondholders are losing faith in CSN as the supplier of steel, iron ore and cement failed to deliver on promises to reduce leverage. The Sao Paulo-based company said last week that net debt swelled to 20.8 billion reais ($6 billion), almost five times its market capitalization, as leverage soared to the highest level in more than a decade.

“The debt is becoming unbearable, causing bond prices to drop to distressed levels,” Cedric Rimaud, director of emerging-market research at Gimme Credit, said in a note to clients. “Until some asset sales are announced, this will continue.”

Sao Paulo-based CSN’s $1.2 billion of bonds due in 2020 fell 7.6 percent to an all-time low of 61.13 cents. The yield increased 2.12 percentage points to 19.03 percent, or 17.5 percentage points higher than Treasuries. A spread of 10 percentage points indicates distressed debt.

The steelmaker is in talks with creditors to extend the maturity on some of its 7.4 billion reais of debt due in 2016 and 2017 as the company cuts costs and sells lower-returning assets, Paulo Caffarelli, CSN’s corporate executive officer, said on an investor call last week.

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