Brazil Steel Bonds Once Unloved by Traders Are Back in Vogue

  • CSN’s notes have rebounded from a record low in February
  • Steelmaker is cutting costs and selling assets to raise cash

Brazilian steelmaker Cia. Siderurgica Nacional SA is winning back investors in a big way after an exodus earlier this year pushed its bonds to a record low.

Its $1.2 billion of notes due in 2020 have soared 18 percent this month as the company cuts costs and seeks to unload assets. That’s the biggest gain among more than 300 mining and metal company debt securities globally. CSN is also benefiting as concerns ease over a legal dispute over its nominees on the board of rival Usinas Siderurgicas de Minas Gerais SA.

Investors are betting that CSN will start generating cash again as Latin America’s biggest economy is set to rebound next year, which would fuel demand for the company’s steel products. On Aug. 15, CSN reported a quarterly loss that was smaller than analysts expected and a reduction in so-called cash burn. The steelmaker, which has about about 5.5 billion reais ($1.7 billion) in cash, announced late Tuesday that it had sold its Metalic unit for $98 million and has said it plans to make a second asset sale by year-end.

“The worst is done,” said Carlos Gribel, the head of fixed income at Andbanc Brokerage in Miami. “There are a lot of people analyzing CSN and seeing it as an opportunity for upside in Brazil.”

CSN declined to comment on the performance of the company’s bonds through its press office.

Sean Glickenhaus, an analyst at UBS Group AG, said debt investors will be discouraged if CSN fails to follow through on its planned asset divestitures.

“We’ve already seen quite a pop in the bond price,” he said by phone from New York. “Without asset sales, there’s a risk CSN runs into trouble in 2018, when they have some loans due, and certainly in 2019.”

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