Usiminas Posts Record Advance Amid Capital Injection Speculation

  • Valor Economico reports steelmaker's board to meet March 11
  • Company ``running out of cash,'' Guide Investimentos says

Usinas Siderurgicas de Minas Gerais SA, the Brazilian steelmaker battling to generate cash as debt payments loom, rallied the most on record amid speculation that its board will agree on a capital injection.

The shares surged 28 percent to 1.2 reais at 4:50 p.m. in Sao Paulo, the best performer on the Ibovespa benchmark, which added 4.4 percent. Usiminas, the most shorted stock in the index as a portion of its available shares, is still down 23 percent this year. The stock outperformed metal-producing peers as commodity prices extended gains amid mounting speculation that China will unveil measures to buoy the economy.

Usiminas’s board will meet March 11 to discuss a plan for the steelmaker, Valor Economico newspaper reported on Wednesday . On Feb. 18, Usiminas listed a proposed capital increase proposal, as well as extending debt due in 2016, as part of efforts to strengthen its balance sheet after posting a wider loss than analysts estimated.

“The company is running out of cash, so the meeting sparks wagers that some injection may be announced,” Luis Gustavo Pereira, an analyst at brokerage Guide Investimentos Corretora in Sao Paulo.

Usiminas -- whose joint controlling shareholders Techint Group and Nippon Steel & Sumitomo Metal Corp. are engaged in a long-running battle over how to run the company -- is curtailing higher cost production and attempting to sell assets amid deepening losses and surging credit costs.

The company said last month it hired a unit of Credit Suisse Group AG as an adviser to help explore the potential sale of all or part of its manufacturing subsidiary.

Usiminas’s press office said in an e-mailed statement it could not comment on issues being handled by its shareholders.

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