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Moody's to review US Steel ratings for downgrade


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Moody's to review US Steel ratings for downgrade

Moody's on March 31 placed U.S. Steel Corp.'s B1 corporate family rating and defaultrating, B2 senior unsecured notes and B2 industrial revenue bond ratings under reviewfor downgrade.

The review also applies to the steel producer's B1-PD probabilityof default rating.

The rating agency flagged a possible multi-notch downgrade uponconclusion of the review.

Moody's said the company's deteriorating performance, weak debtprotection metrics and continued contraction given the challenging conditions facingthe U.S. steel industry contributed to the review. Tough market conditions, particularlyfor flat-rolled and tubular products thanks to persistent challenges in the energymarkets and U.S. Steel's exposure to the Oil Country Tubular Goods sector also contributedto the move.

The rating agency expects the company will continue to incurlosses this year despite key input costs for scrap, iron ore and metallurgical coalhaving declined significantly, as the declines will not be sufficient to help earnings,particularly for integrated producers such as U.S. Steel.

In addition, the steel industry also faces import risks partlydue to the stronger U.S. dollar.

Moody's review will focus on the company's ability to furtherreduce costs through the Carnegie Way program, expected costs per ton, level ofspot and contract value added sales, and the ability of the company to be at leastbreak-even free cash flow generation

The review will also take into account the end markets whereU.S. Steel sells and the expected demand from such markets, as well as the timehorizon over which the company will improve performance.

The company bookeda US$1.51 billion loss in 2015, compared to a profit of US$102 milliona year earlier.