Fitch Ratings on May 5 put a BB/RR2 rating on 's plannedUS$980 million debt issueof 8.375% senior secured notes due 2021.
As these notes are secured against all of the company'sassets — which had a book value of about US$2.2 billion as of March 31 — therating agency also downgraded U.S. Steel's senior unsecured notes to B-/RR6from B+/RR4 given the addition of senior secured debt in the capital structureahead of the senior unsecured notes. This action will affect about US$2.2billion worth of notes.
In its recovery analysis, Fitch assumes a going-concernEBITDA of US$550 million compared to the twelve-month EBITDA loss of US$151million at March-end, to reflect a recovery in the prices and volumes offlat-rolled steel products, as well as modest improvement in tubular steelproducts due to the uncertainty in the oil markets.
The company will have administrative claims totalling US$275million for the year with expected operating EBITDA of about US$350 million,according to Fitch assumptions.
While this analysis indicates outstanding recovery for thesecured notes, Fitch constrained the recovery rating to RR2, which means between71% to 90% of the secured notes, reflecting the less liquid nature of thecollateral.
Recently, Moody's alsocut U.S. Steel's corporate family rating further into junkterritory, to B3 from B1, due in part to deteriorating conditions in the NorthAmerican steel sector, especially for producers in the flat-rolled and tubularmarkets.