By Alex MacDonald
LONDON--Fitch Ratings became Wednesday the second credit ratings
company to downgrade steel titan ArcelorMittal (MT) as a result of
protracted weak demand in the steel markets, particularly in
Western Europe where the euro-zone sovereign debt crisis continues
to take its toll on consumer requirements.
Fitch downgraded the world's largest steelmaker by one notch to
'BBB-' from 'BBB', just one notch short of junk status.
Standard and Poor's last week downgraded the company to junk
status, or BB+/B, from BBB-/A-3 or investment grade. Both Fitch and
S&P have a negative outlook on ArcelorMittal.
Moody's Investors Service is the only one of the three major
credit ratings companies that hasn't taken recent action on
ArcelorMittal. It downgraded its outlook on the company to negative
from stable last week but maintained its Baa3 investment grade
credit rating.
ArcelorMittal said it notes the recent actions by the ratings
companies, which it said were "driven by a change in their view on
the macro-economic environment."
"We have a clear roadmap for improving our already robust
financial position through the programs of management gains, asset
optimization and asset disposals, all of which are proceeding
according to plan and will further improve our credit ratios," the
company said.
At 1532 GMT, ArcelorMittal's shares were down 0.5% or EUR0.06 at
EUR13.03 a share, resulting in a market capitalization of EUR20.3
billion.
Fitch said its downgrade reflects the challenging short-term
outlook for steel markets, particularly in Western Europe, which
will mean a slower rate of debt reduction over the next
two-to-three years compared with previous expectations.
"While ArcelorMittal continues to make good progress with
non-core asset disposals and its cost-saving programs, these
measures will not fully offset the negative impact of weaker
organic cash flow generation," it said.
ArcelorMittal's total debt was $26.5 billion at end-June. It has
been seeking to reduce this and since September has sold $2.7
billion in assets; it plans to continue selling more in the months
ahead.
ArcelorMittal's Chief Financial Officer Aditya Mittal said last
week that the effect of a one notch credit downgrade would be
around $100 million in extra interest expenses, an amount which
analysts say is immaterial.
Write to Alex MacDonald at alex.macdonald@dowjones.com