Usiminas Leads Brazil Steelmaker Gains on Debt Plan Speculation

  • Steelmaker climbs 14% in past two sessions, leading rally
  • Investors bet company will profit as Brazil recovers

Usinas Siderurgicas de Minas Gerais SA is leading a two-day rally in Brazilian steelmakers on speculation the company has a plan to deal with its debt load.

Usiminas climbed 3.8 percent to 4.11 reais at 1:22 p.m. in Sao Paulo, leaving it up 14 percent over the past two days after people familiar with the matter said the Belo Horizonte-based company will offer holders different options to restructure $180 million of notes due in 2018. The Ibovespa stock gauge is up 3.2 percent in the same span.

Investors are betting that Usiminas, the Brazilian steelmaker most dependent on local demand, will be well positioned to take advantage of a recovery in Latin America’s largest economy as the company increases efforts to shore up its finances, according to Ari Santos, a stocks trading manager at brokerage H.Commcor in Sao Paulo.

"It’s very good news that Usiminas is taking more steps to solve its problems and get in good shape," Santos said. Brazil’s "corporate debt burden has been seen as an obstacle to a recovery in financial assets and the economy."

The dollar-bond proposal follows a June accord with local creditors that gave Usiminas 10 years to pay back debt accounting for 75 percent of the total it’s renegotiating. The company’s net debt is equivalent to 2.34 times its earnings before interest, taxes, depreciation and amortization, according to data compiled by Bloomberg.

Brazilian steelmakers also gained Thursday after Credit Suisse Group AG said in a note to clients that consumption has reached a bottom in Brazil and demand is poised to rise in 2017 as the industrial production rebounds.

Latin America’s biggest economy contracted 3.8 percent in 2015 and is forecast to shrink 3.4 percent in 2016. The Ibovespa has advanced 66 percent in dollar terms this year on optimism that Acting President Michel Temer, who replaced Dilma Rousseff as the leader of the nation while she faces an impeachment trial for allegedly breaching budget rules, will be able to restore growth.