MOODY'S CONFIRMS USINOR'S LONG TERM AND SHORT TERM RATINGS
Moody's Investors Service today confirmed Usinor's Baa2 senior unsecured debt ratings and its Prime-2 short term rating for commercial paper following a review initiated on 22 September, 1998 when the company announced that it had made an offer for a majority shareholding in Cockerill Sambre SA (Cockerill). The confirmation is based on Moody's belief that management will continue to use cash generation to reduce debt levels originally increased to finance the company's on-going restructuring and business expansion.
Usinor has been increasing the scale of its business base through acquisitions during 1998 in response to customer requirements for global suppliers, and to a lesser extent, to keep pace with economies of scale in a consolidating sector. While these acquisitions were all strategically sound, broadening the group's geographical reach at locations where core customers were building production volumes, their financing has added considerable debt for Usinor to support at a time when any strong recovery in steel prices looks remote. This latest proposed significant investment in Cockerill, a Belgian and German carbon steel business, is not expected to materially stretch the group further financially, provided that Usinor achieves reasonable disposal values for its Aster businesses. Debt levels should reduce over the intermediate term as operating performance and cash flow benefit from incremental volume, mix improvement and successful cost reduction programmes so that debt protection ratios should gradually strengthen, albeit to lower levels than seen in the three years from 1995, the peak of the prior cycle, to 1997. Nevertheless, until significant debt reduction is achieved, Moody's cautioned that Usinor is weakly positioned in its Baa2 rating category.
Usinor: 7.25% Bonds due 2006; 8.5% Eurobonds due 2002; 3% Convertible Eurobonds due 2006 at Baa2
and Commercial Paper programme at Prime-2.
Usinor is Europe's largest steel company by revenues. The company has its head office in Paris, France and had sales of approximately Euros 10.9 billion for the year ended 31 December, 1998.
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