A Brazilian court has prevented local steelmaker Companhia Siderurgica Nacional (CSN) from paying dividends this week, the company said. CSN first announced on August 17 it would pay investors and shareholders dividends.
CSN labeled the court’s decision as a “surprise” this week. As a result, dividends payment will be suspended, effectively on August 30. CSN said it is evaluating its options to keep the shareholders’ best interests, but market analysts did not welcome CSN’s decision to pay BRL 890 million in dividends. Analysts said the company should focus on reducing debt, as opposed to paying shareholders dividends.
Credit rating agency Fitch Ratings said last week CSN's “extraordinary dividend payment” was “credit negative.”
“As a result of this payment, CSN may need to sell more than BRL 4.0 billion of additional assets within the next six months in order to stabilize its credit rating and avoid a downgrade,” it said in a statement last week.
Fitch said 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 $480 million of notes maturing on Sept. 21, 2019 and $870 million of notes due in 2020.”