Usiminas’ challenging financial metrics as well as a sharp decline in the company’s bonds have raised concerns among analysts and investors whether the company could file for bankruptcy protection.
A media report this week noted that a 27 percent decline on Tuesday on the company’s bonds raised the flag that the company could either restructure its debts or file for bankruptcy protection.
Investors are already considering the second possibility, however, it’s said to be the last resource Usiminas could use.
A media report noted that Usiminas shareholders Ternium and Nippon Steel discarded the possibility of injecting more money into the struggling Brazilian steelmaker. On the other hand, Usiminas has struggled to make money and has few assets to sell. Brazil’s declining domestic demand for steel adds to the company’s woes.
Usiminas had about BRL 2.4 billion in available funds as of the end of September 2015, according to media reports, which could help it survive the persisting stagnant demand in Brazil’s steel industry. However BRL 1.3 billion of that is currently attributed to Mineracao Usiminas (Musa), Usiminas’ mining arm. Sumitomo, which is also owner of Mineracao Usiminas, is said to be opposing the idea of using Musa’s money to help Usiminas meet its financial obligations.
Usiminas has posted consecutive net losses in the past five quarters, including Q3. The company has already proposed its investors a capital injection to be used in the short term. As there’s no guarantee of new money coming for the company, chances of a bankruptcy protection filing are increasing.