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Rating Action:

Moody's downgrades Nucor's ratings; sr. unsec to A3; outlook negative

22 Oct 2012

Approximately $3.3 billion of debt downgraded

New York, October 22, 2012 -- Moody's Investors Service downgraded Nucor's senior unsecured rating to A3 from A2 and the company's short term rating to Prime-2 from Prime-1. The rating outlook is negative. This concludes the review for possible downgrade that was initiated on October 1, 2012.

Downgrades:

..Issuer: Berkeley (County of) SC

....Senior Unsecured Revenue Bonds, Downgraded to A3 from A2

..Issuer: Blytheville (City of) AR

....Senior Unsecured Revenue Bonds, Downgraded to A3 / P-2 from A2 / P-1

..Issuer: Box Elder (County of) UT

....Senior Unsecured Revenue Bonds, Downgraded to A3 / P-2 from A2 / P-1

..Issuer: Bucks County Industrial Development Auth., PA

....Senior Unsecured Revenue Bonds, Downgraded to A3 / P-2, from A2 /P-1

..Issuer: Darlington (County of) SC

....Senior Unsecured Revenue Bonds, Downgraded to A3 /P-2, from A2 / P-1

..Issuer: Decatur Industrial Development Board, AL

....Senior Unsecured Revenue Bonds, Downgraded to A3 / P-2, from A2 /P-1

..Issuer: Evendale (Village of) OH

....Senior Unsecured Revenue Bonds, Downgraded to A3 / P-2, from A2 / P-1

..Issuer: Hertford Conty of Ind Fac & Pol Ctrl Fin Aut

....Senior Unsecured Revenue Bonds, Downgraded to A3 / P-2 from A2 / P-1

..Issuer: Jewett Economic Development Corporation

....Senior Unsecured Revenue Bonds, Downgraded to A3 / P-2 from A2 / P-1

..Issuer: Memphis-Shelby Cnty Ind. Dvlpmt Board, TN

....Senior Unsecured Revenue Bonds, Downgraded to A3 / P-2, from A2 /P-1

..Issuer: Nucor Corporation

....Senior Unsecured Commercial Paper, Downgraded to P-2 from P-1

....Senior Unsecured Regular Bond/Debenture, Downgraded to A3 from A2

..Issuer: St. James (Parish of) LA

....Senior Unsecured Revenue Bonds, Downgraded to A3 / P-2 from A2 / P-1

..Issuer: Stanton (County of) NE

....Senior Unsecured Revenue Bonds, Downgraded to A3 from A2

..Issuer: Tuscaloosa County Industrial Dev Auth, AL

....Senior Unsecured Revenue Bonds, Downgraded to A3 from A2

Outlook Actions:

..Issuer: Nucor Corporation

....Outlook, Changed To Negative From Rating Under Review

RATINGS RATIONALE

The downgrade considers Nucor's weaker debt protection and higher leverage metrics. Although the company has evidenced improvement from the depths of the recession, the current economic environment and challenges facing the company and the US steel industry make it unlikely that Nucor can return to sustainable metrics appropriate for an A2 rating over the next eighteen months. A continued lackluster construction industry, slowing manufacturing demand, and steel price pressure are expected to result in weaker earnings levels over this time frame.

Despite the weaker metrics as evidenced by an EBIT/interest ratio of approximately 6x for the twelve months through September 29, 2012 and a debt/EBITDA ratio of roughly 2.6x, the rating acknowledges the company's good cash generating capacity and solid liquidity position as bolstered by $2.1 billion in cash at September 29, 2012. Although the credit metrics remain somewhat weak for the A rating category, the A3 rating anticipates the company's repayment of $650 million of debt maturing in the October-December 2012 time frame and a further $250 million debt repayment when the 5% senior notes mature in June 2013. On a pro-forma basis at the most recent twelve month EBITDA run rate, debt/EBITDA would improve to approximately 2x. We expect that Nucor would continue to hold a more than adequate cash position relative to its requirements after repaying this maturing debt. In addition, the company holds restricted cash of $414 from a prior debt issuance to be used towards funding its new DRI facility in Louisiana, which currently comprises a major portion of its strategic capital expenditure spending.

The A3 rating also incorporates the company's broad geographic footprint in the US, its diversified product mix, and strong position in markets served. Further, the electric arc furnace model and variable cost structure provides Nucor the flexibility to adjust production levels to demand changes more easily than integrated producers in the steel industry and contributes to a lower all in cost position. While the company's sales to the automotive and general manufacturing industry have supported shipments and earnings, the construction market remains a key end market for Nucor and weakness in this market continues to limit the degree of earnings improvement that can be achieved. Until the construction market returns to more robust growth levels, which we do not expect in 2013, EBITDA and earnings are expected to continue at less than optimum levels given Nucor's production capacity and technological capabilities.

The negative outlook reflects the headwinds affecting Nucor and the steel industry. Weakening demand and increasing import levels continue to impact the industry as capacity utilization contracts and prices weaken. Given the current macroeconomic environment and seasonal weakness in the fourth quarter, we do not expect material improvement from Nucor's third quarter 2012 performance.

Given our outlook for performance for Nucor and the steel industry over the next twelve to eighteen months and the company's need to materially improve debt protection and leverage metrics, a ratings upgrade is unlikely over this time frame although the outlook could be stabilized should macro economic conditions improve and a more sustainable recovery take hold.

The rating could be downgraded should the company's liquidity position deteriorate such that its cash position reduces to less than $1.0 billion. In addition should the ratio of (cash from operations less dividends) to debt be sustained at less than 35% and leverage, as measured by the debt/EBITDA ratio, continue to exceed 2.0x, the rating could be downgraded.

The principal methodology used in rating Nucor was the Global Steel Industry Methodology published in January 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Headquartered in Charlotte, North Carolina, Nucor Corporation ("Nucor") is a leading domestic producer of carbon and alloy steel and steel products including bar, beam, sheet, plate, joists, and joist girders. Through its subsidiary, David J. Joseph Company (DJJ), Nucor is a leading scrap company, brokering and processing ferrous and nonferrous scrap metals among other products. For the twelve months ending September 29, 2012, Nucor's steel and steel product shipments of approximately 20.4 million tons were up roughly 3% from the comparable period in 2011 and the company generated revenues of $19.8 billion.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare the rating are the following : parties involved in the ratings, parties not involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Carol Cowan
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Brian Oak
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's downgrades Nucor's ratings; sr. unsec to A3; outlook negative
No Related Data.
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