Metalurgica Gerdau, the holding company that operates Brazilian steelmaker Gerdau, is considering a BRL 1.5 billion ($377,587) capital increase, which could help the controlling company to reduce its debt, Gerdau told investors this week.
As Metalurgica Gerdau isn’t receiving sufficient money from Gerdau to pay its BRL 2 billion ($503,450) net debt, the move was seen as positive for some investors. The holding company received about BRL 342 million in dividends from Gerdau last year, which is less than the annual cost of the company’s obligations, which are around BRL 350 million.
Since Metalurgica Gerdau has expensive interests to pay, the company is carefully considering a potential share offering, which could be launched, according to local newspaper Valor, in a restricted-effort offering, whose amount of new shares will be put up for sale among existing shareholders and a limited number of outside investors.
In response to recent media reports, Gerdau said it is “analyzing alternatives to make the company’s capital structure more optimal.” It also said, following Valor’s report, the company is yet to take a decision on the potential share offering.
Only qualified investors can participate in a public offering with restricted efforts, media reports said, adding the deals cannot be marketed through road shows or the media.
Public offering with restricted efforts were seen by local media as a quick solution for Metalurgica Gerdau’s expensive interests and debt, and couldn’t help the Gerdau family to not dilute its final share in the new offering. Generally speaking, such share offerings impact more minor shareholders than major shareholders, such as the Gerdau family. Gerdau has a 65 percent stake in the holding company, Metalurgica Gerdau.