Fitch Ratings: CSN's dividend payment to slow deleveraging; additional asset sales critical

Thursday, August 23, 2018


August 23

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Fitch Ratings views CSN's extraordinary dividend payment of BRL890 million (US$216mn), announced in conjunction with the refinancing of its bank debt with Banco Bradesco SA, as a credit negative. As a result of this payment, CSN may need to sell more than BRL4.0 billion of additional assets within the next six months in order to stabilize its credit rating and avoid a downgrade.

CSN's 'B-'/Rating Watch Negative rating reflected Fitch's expectation that the company would be successful in extending its local bank debt. The aggressive dividend payment coincides with a period of continued strain on the company's capital structure and it heightens the repayment risk of CSN's USD480 million of notes maturing on Sept. 21, 2019 and USD870 million of notes due in 2020.

Based on Fitch's current mid-cycle price deck for modelling purposes of USD60/t of iron ore during 2018, CSN would need to sell about BRL5.7 billion of assets in order to reduce net leverage to below 5.0x by year end 2018. During May, CSN commenced this process by announcing that it had reached an agreement to sell its subsidiary Companhia Siderurgica Nacional, LLC (CSN LLC), located in the United States, for USD400 million. Assuming no additional asset sales during 2018, CSN's total adjusted net debt to EBITDA ratio would be around 5.9x. Assuming iron ore prices average USD70/t through 2018 and the company is not able to complete any additional asset sales, its estimated net leverage would be 4.6x.

For 2019, Fitch uses an iron ore modelling price of USD55/t. At this price, BRL6 billion of asset sales over the next 18 months in addition to proceeds from the sale of CSN LLC would result in an estimated net leverage ratio of 5.0x for 2019.


Phillip Wrenn

Associate Director


Fitch Ratings, Inc.

70 West Madison St.

Chicago, IL, 60602

Debora Jalles



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