Fitch lowers Posco to BBB

Fitch Ratings said it downgraded South Korea-based steel producer Posco's long-term issuer default rating and senior unsecured rating to BBB from BBB+.

The outlook is stable.

The agency also downgraded Posco's short-term issuer default rating to F3 from F2.

Fitch said the downgrade reflects Posco's deteriorating credit metrics caused by elevated levels of debt and moderate profitability, and the expectation of significant investments in coming years. The agency expects the company's FFO net leverage to exceed 3.5x in 2013 and 2014, above the agency's previous threshold of 3.5x where negative rating action would have been considered.

The stable outlook reflects Fitch's expectation that Posco's earnings will slowly recover after bottoming out.

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