S&P puts Cleveland-Cliffs on developing watch

S&P said it placed its ratings for Cleveland-Cliffs Inc., the BB- issue-level rating on the senior unsecured debt, BB+ issue-level rating on the senior secured debt, and B issue-level rating on the subordinated debt, on CreditWatch with developing implications.

Cliffs announced it intends to buy United States Steel Corp. in a deal that reflects an enterprise value of about $10 billion. It plans to fund half the deal with cash and the other with debt.

“Cliffs' publicly announced offer to acquire all the shares of USS could significantly affect the combined entity's competitive position by consolidating the production of iron and blast-furnace steel in the U.S. Midwest, but it also could add debt to two companies with a track record of volatile cash flows and ratios and long-standing elevated credit risk.

“USS has rejected the offer by Cliffs, and the former initiated a strategic review process to evaluate alternatives that could include selling the entire company or some of its producing assets after receiving multiple unsolicited offers,” S&P said in a press release.

CreditWatch with developing implications reflects the possibility S&P could raise, lower, or affirm the ratings on Cliffs.

“We expect to resolve the CreditWatch placement only once the credit trajectory clears up, which will likely require a definitive path on any potential transaction and associated debt plans,” the agency said.

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