Credit rating agency Fitch said it has maintained a “negative rating watch” for both the long-term foreign and the national scale currency ratings of Brazil steelmaker Companhia Siderurgica Nacional's (CSN). The negative rating watch was also maintained for CSN’s -/RR4 senior unsecured notes.
CSN’s long-term foreign ratings remained at B-, while the steelmaker’s national scale ratings were kept at BB-(bra), Fitch said.
“The B- rating reflects CSN's stressed financial profile during the past few years due to high leverage and elevated refinancing risks,” Fitch said.
“Weak iron ore prices during 2015/2016, the severe macroeconomic recession in Brazil that led to soft demand for steel products and high interest rates, all hurt CSN's cash flow and led to an unsustainable capital structure,” the credit rating agency noted.
It added such a “combination of a relatively better scenario” for iron ore prices, lower local interest rates and improving steel industry in Brazil is expected to “help to improve operating cash flow; however, Fitch believes that the sale of non-core assets remains imperative in order to support effective deleverage and the refinancing of the bonds in the international market.”
On the other hand, the negative watch reflects the agency’s view that CSN faces ongoing challenges with what it called “high refinancing risks and limited financial flexibility.”