S&P rates U.S. Steel convertibles, notes BB

Standard & Poor's said it assigned a BB rating to United States Steel Corp.'s proposed $250 million senior convertible notes due 2019 and its proposed $250 million senior notes due 2021.

The recovery rating on the notes is 3, indicating 50% to 70% expected default recovery.

The notes will be senior unsecured obligations and will rank equally with all of U.S. Steel's existing and future unsecured and unsubordinated indebtedness, S&P said.

The proceeds will be used to redeem existing indebtedness and general corporate purposes, the agency said.

The ratings and negative outlook on the company reflect its fair business risk and aggressive financial risk, S&P said.

The integrated steel producer has capital-intensive operations, is exposed to highly cyclical and competitive markets and has a high degree of operating leverage, the agency said.

Its financial risk profile reflects relatively high levels of book debt and significant underfunded post-retirement benefit obligations, S&P added.

The ratings also consider its strong liquidity, good scope and breadth of product and operations, the agency said, and the benefits of its backward integration into iron ore and coke production.

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