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Bond Market News

US Steel Upgraded to BB by Fitch

Fitch upgraded US Steel to BB from BB-, with a stable rating outlook. The improvement in US Steel’s rating is firstly indicative of their constructive debt reduction program. Currently, they have no outstanding borrowings on credit facilities after reducing their total debt outstanding by more than $1.9bn since Q1 2021. In addition, a buoyant steel market and high steel prices have helped the firm with significant EBITDA generation. Prices jumped to historical highs in 2021 and have since dipped, but still remain high at over $1000/ton. Fitch remains optimistic on the market’s outlook, expecting stable supply and demand dynamics and raw materials’ prices to remain high. Consequently, Fitch also anticipates that US Steel will be able to sustain a total debt/EBITDA of 2.5x. The improvement in its rating is also a reflection of the steel producer’s intent to shift towards more efficient and lower cost mills, evident from the acquisition of Big River Steel Holdings. These capital expenditures will be funded with cash and future FCFs, reinforcing the firm’s relatively comfortable credit profile, Fitch added.

US Steel’s dollar bonds dropped with the overall bearish move in rates markets, despite the rating upgrade – its 6.65% 2037s were down 5.96 points to 81.97, yielding 8.85%

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