Usiminas Board Said to Approve Nippon Capital Increase Proposal

  • Transaction, opposed by Ternium, still needs shareholders' nod
  • Usiminas is seeking a standstill agreement with creditors

Usiminas’ board approved a 1 billion-real ($279 million) capital increase proposed by joint controller Nippon Steel & Sumitomo Metal Corp. as the Brazilian steelmaker seeks funds to repay debt, people briefed on the matter said.

The transaction, which was opposed by directors representing the other co-controller, Ternium, still needs shareholder approval at a meeting to be convened in the coming days. Nippon and Ternium, which control Usiminas via a shareholder pact, have been engaged in a long-running battle over how to run the company.

At the same time,  Usinas Siderurgicas de Minas Gerais SA, as the company is known formally, is seeking a standstill agreement with creditors as it curtails higher-cost production and attempts to sell assets amid deepening losses and surging credit costs.

Usiminas shares, down 4.3 percent on Friday, have surged 138 percent in the past month, the biggest four-week surge on record, in anticipation of a capital injection. Still, the current share price is only a fraction of its 47.30-reais peak in 2008.

Nippon and Ternium presented vastly different capital injection proposals.

Nippon would be willing to buy the full 1 billion reais of new voting shares if other holders chose not to subscribe.

Ternium, which is owned by Italian billionaire Paolo Rocca’s family, proposed a 500 million-real injection subject to Usiminas securing access to cash from its MUSA unit and, according to a person with knowledge, a management overhaul.

In 2014, Chief Executive Officer Julian Eguren and two other Techint-appointed executives were ousted over alleged financial misconduct.

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