The proposed equity offering by Brazil-based steel giant Gerdau, announced earlier this week, continues to demonstrate the company's commitment to an investment grade capital structure and would strengthen the company's position within the 'BBB-/AA+(bra)' rating categories, the leading global ratings agency Fitch Ratings has said.
As SteelOrbis previously reported, Gerdau plans to increase the company's available funds by issuing at least R$3.8 billion (US$2.3 billion) worth of common and primary stock. The offer could be as high as R$4.2 billion (US$2.5 billion).
According to Fitch, if the issuance is successful, Gerdau's net debt-to-EBITDA ratio would fall below 2.0 times on a pro forma basis. This compares with ratios of 2.5:1 during 2010 and 2.9:1 during 2009.
Proceeds from the equity issuance would also help to fund a portion of Gerdau's ambitious capital expenditure program over the next three years, Fitch said. This program includes the recently announced investment of R$2.5 billion (US$1.5 billion) to expand the steel output and rolling capacity at the company's Cosigua mill. Gerdau will also be embarking on production expansion at its iron ore mines, recently announced at 2.9 billion mt of resources. This should allow for 100 percent self-sufficiency in its iron ore requirements for its integrated mill at Ouro Branco-Minas Gerais State, while also allowing for a large volume of exports.