S&P keeps Arcelor on developing watch

Standard & Poor's said it kept Arcelor SA's BBB/A-2 corporate credit ratings on CreditWatch with developing implications after the group's announcement of a number of defensive measures that follow the unsolicited takeover bid from Mittal Steel Co. NV.

The measures include an enhanced program of capital returns to shareholders of up to €5 billion over the next 12 months, should the bid from Mittal fail to take place, an about €400 million increase of the 2005 dividend payment and plans to place the recently acquired Dofasco Inc. in an independent foundation structure that could make it more difficult for Mittal to sell Dofasco if the bid proceeds.

S&P said that the planned €5 billion cash distribution to shareholders, should it be implemented, would likely weaken Arcelor's financial risk profile. Should the Mittal bid not succeed, part of the agency's assessment in resolving the CreditWatch will be an evaluation of the group's overall financial policy, taking into consideration these latest steps.

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