S&P assigns U.S. Steel notes B+

S&P said it assigned U.S. Steel Corp.’s proposed $700 million of senior secured notes a B+ rating with a 1 recovery rating. The 1 recovery rating indicates S&P’s expectation for very high recovery (90%-100%; rounded estimate: 95%) in a hypothetical default.

“The company’s completion of this financing is a good indication of the near-term sustainability of its capital structure, considering the large recent declines in the market prices for its unsecured debt and equity suggesting at least partially the likelihood of the secured debt. Nevertheless, the successful completion of the transaction, coupled with its equity market capitalization of more than $1 billion during this severe stress, demonstrates that the market is at least somewhat confident U.S. Steel will return to profitability,” S&P said in a press release.

The agency also revised the outlook for U.S. Steel to stable from negative and affirmed the company’s B- rating.

“The stable outlook reflects the company’s bolstered liquidity position even though its adjusted debt leverage calculations will become meaningless as its EBITDA drops below breakeven in 2020. We expect that U.S. Steel will sustain adequate liquidity through 2021 assuming at least a modest rebound from the extremely weak conditions in the steel market,” the agency said.

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