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S&P downgrades thyssenkrupp's long-term rating to BB-

S&P Global Ratings downgraded the long-term rating on German steelmaker thyssenkrupp AG to BB- from BB and affirmed its B short-term rating.

The rating agency expects the company to report negative cash flow of €1.1 billion for this year and for it to remain negative in 2020 due to weak conditions in the steel and automotive markets.

The action was also based on the rating agency's view that thyssenkrupp's funds from operations-to-debt in 2020 will be about 15%, despite the planned IPO of a minority stake of its elevator technology business, due to the ongoing negative free cash flow and weak market conditions.

A partial IPO in the first half of 2020 is expected to generate net cash proceeds of about €2.0 billion, resulting in adjusted funds from operations-to-debt of about 15% in 2020, up from about 10% in 2019.

Ratings said it will likely lower its ratings on thyssenkrupp if the company fails to undertake the partial IPO and if operating performance remains weak.

Meanwhile, a full sale of the elevators division will allow the company to readjust its capital structure on the back of expected gross sale proceeds of about €13 billion to €17 billion.

However, a full sale would significantly weaken the business risk profile of the remaining group as the elevators division provides over 50% of the group's reported EBITDA, the rating agency noted.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.