Steelmaker Usiminas Goes From Worst to First on Debt Reprieve

  • Brazil company’s shares rise most in three months in Sao Paulo
  • Usiminas has 10 years to repay debt with a 3-year grace period

Usiminas rose the most among major steelmakers globally as the Brazilian company finalized details of a renegotiation with most of its creditors.

Usinas Siderurgicas de Minas Gerais SA, as the company is formally known, will have 10 years to pay back the debt and a three-year grace period on the principal under an arrangement with banks and holders of local bonds that’s subject to completion of a 1 billion-real ($288 million) capital increase by July 22, it said in a filing Wednesday.

The stock gained 23 percent to 2.05 reais at the close in Sao Paulo Wednesday, making it the best performer in the BI Global Steel Producers Competitive Peer Group. In the past two years, Usiminas is the index’s worst performer with a 74 percent slump.

“There is no doubt that this announcement comes as a welcome surprise to us, helping alleviate balance sheet concerns and buying much needed time,” BTG Pactual analyst Leonardo Correa said in a client note. “However, Usiminas continues to deliver very weak Ebitda, with leverage at uncomfortably high levels.”

New CEO

The accord with creditors including Banco do Brasil SA, Bradesco SA, Itau SA and state development bank BNDES accounts for 75 percent of the total debt Usiminas is renegotiating, the Belo Horizonte-based company said.

Usiminas shareholders approved the capital increase in March as creditors granted it a 120-day standstill deal. Wednesday’s accord still requires shareholder approval.

New Chief Executive Officer Sergio Leite said in an interview last week that he expects the company to deliver positive earnings before interest, taxes, depreciation and amortization this year.

Without giving details, Usiminas said in an e-mailed response to questions that it was “adjusting personnel” at its Cubatao plant. Newspaper Estadao reported Wednesday that the company planned to dismiss 500 workers by July 15.

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