Moody's cuts ArcelorMittal debt to junk
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Ratings agency Moody's has cut Lakshmi Mittal-led ArcelorMittal's long-term debt to junk status, saying the steelmaker's debt-cutting efforts had been modest and its market would likely get worse before it got better.
Moody's downgraded the world's largest steelmaker's senior unsecured notes to Baa3 from Ba1 on Tuesday and maintained a negative outlook.
It joined Standard & Poor's in rating ArcelorMittal one notch below investment grade, the former taking its action in August, shortly after second-quarter results.
At that time, Moody's cut its outlook on ArcelorMittal to negative, saying the company needed to lower net debt $5 billion by early 2013 to avoid a downgrade.
Moody's said on Tuesday ArcelorMittal's third-quarter results, published last week, were the worst since the second quarter of 2009.
Challenging conditions would continue for several quarters and the amount of debt reduction required to hold the previous Baa3 rating was either unattainable or, if attempted through asset disposals, would materially impact earnings, Moody's said.
It said ArcelorMittal might breach credit facility covenants in June 2013 unless it repaid a considerable amount of debt or secured amendments with lenders.
ArcelorMittal has said losing investment grade status completely would cost about $100 million in interest charges and that such status was important but not imperative.
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