Some of the pressures affecting Brazil steelmaker Companhia Siderurgica Nacional (CSN) could lead to an “unsustainable” capital structure, credit rating agency Standard & Poor's (S&P) said, at the same time downgrading the company’s global ratings from B to CCC+.
According to S&P, CSN’s high interest burden, along with its “weak” operational results, “will continue to consume the company’s cash in the next quarters,” despite an expected improvement in the steelmaker’s iron ore and steel output, which was forecasted by S&P to be “slight.”
“CSN’s limited capacity to generate cash and its significant debt amortizations from 2018 … will make its capital structure unsustainable,” S&P said.
“That would increase refinancing risks if there’s no willingness by creditors to extend maturities deadlines and [there isn’t a] significant improvement in market prices and demand.”
CSN is trying to disinvest from some assets, including its Sepetiba Tecon terminal, as a way to reduce debt and improve its capital structure.
Recently, the company sold a tinmaker for $98 million to Polish manufacturer Can-Pack.
S&P said that despite the downgrade in CSN’s global ratings, its outlook is “stable,” since the company still has “enough liquidity” to cover its operational and financial obligations in the next 12-18 months, “despite the continuous use of cash in 2017.”