Fitch rates Algoma B

Fitch Ratings said it assigned Algoma Steel Group Inc. and Algoma Steel Inc. first-time B long-term issuer default ratings with a stable outlook. The agency also assigned BB/RR1 ratings to Algoma Steel Inc.'s first-lien secured ABL credit facility and BB-/RR2 ratings to its new $350 million of second-lien senior secured notes due 2029.

“The ratings reflect Algoma's relatively small size and the heightened operational risk of operating a single blast furnace facility. This is offset by the company's strategy of transitioning to an electric arc furnace (EAF) facility which lowers costs and capital intensity. The ratings also reflect Fitch's expectation for adequate liquidity, low financial leverage and minimal execution risk to complete the project and fund associated capex for the new EAF,” the agency said in a press release.

Fitch said it projects Algoma's EBITDA leverage, 0.3x as of March 31, 2023, to be kept below 2.5x through FY27.

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