S&P downgrades Usiminas

Standard & Poor’s said it lowered the global scale corporate credit rating on Usinas Siderúrgicas de Minas Gerais SA (Usiminas) to SD (selective default) from CCC+, along with its national scale rating to SD from brCCC+.

S&P also said it lowered the rating on the company’s senior unsecured debt to C from CCC and national scale issue-level rating on its senior unsecured debentures to brC from brCCC.

The agency also said it lowered the recovery ratings on the company’s senior unsecured debt to 6 from 5H, reflecting a negligible recovery of less than 10%.

The downgrades follow news that Usiminas reached a standstill agreement with the banks that hold most of its debt as part of a restructuring process, which includes a R$1 billion capital injection from its shareholders, S&P said.

The approval of the capital injection by the shareholders was on the condition that Usiminas successfully reach a standstill agreement with its creditors, the agency explained.

The agreement allows Usiminas to suspend principal payments on its bank loans for 120 days, S&P said. During this period, banks cannot accelerate the company’s debts. This also will allow Usiminas to negotiate terms with debtholders and restructure its capital to be consistent with its cash-generation prospects, the agency said.

The company will continue to pay interest on the bank loans, S&P said, and interest and principal on its bonds and debentures.

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