CHICAGO--(BUSINESS WIRE)--The proposed equity offering by Gerdau S.A. (Gerdau) continues to demonstrate the company's commitment to an investment grade capital structure and would strengthen the company's position within the 'BBB-/AA+(bra)' rating categories, according to Fitch Ratings. Gerdau's primary offering is intended to increase capital by BRL3.8 billion (USD2.3 billion) to BRL4.2 billion (USD2.5 billion).
If the issuance is successful, Gerdau's net debt-to-EBITDA ratio would fall below 2.0 times (x) on a pro forma basis. This compares with ratios of 2.5x during 2010 and 2.9x during 2009. The proposed level of leverage is in line with the average ratio of 1.6x maintained by the company between 2006 and 2008. Gerdau's leverage had increased in recent years due to the sharp downturn in the steel market during 2009 and a high level of investments during 2010, the largest of which was the share purchase of 33.7% of its subsidiary Gerdau Ameristeel Corp. for USD1.6 billion. This transaction increased Gerdau's ownership of Gerdau Ameristeel to 100%.
Proceeds from the equity issuance would also help to fund a portion of the company's ambitious capital expenditure program over the next three years. This program includes the recently announced investment of BRL2.5 billion (USD1.5 billion) to expand the steel output and rolling capacity at the company's Cosigua mill. Gerdau will also be embarking on production expansion at its iron ore mines, recently announced at 2.9 billion tons of resources. This should allow for 100% self-sufficiency in the company's iron ore requirements for its integrated mill at Ouro Branco-Minas Gerais State, while also allowing for a large volume of exports, a new market for Gerdau.
Additional information is available at 'www.fitchratings.com'
Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (Aug. 13, 2010).
Applicable Criteria and Related Research:
Corporate Rating Methodology
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=546646
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