Fitch issues 'BB+' rating on US Steel debt offer

NEW YORK

Ratings agency Fitch Ratings on Tuesday assigned a rating of "BB+" to $500 million in debt that United States Steel Corp. intends to issue.

U.S. Steel, based in Pittsburgh, said Monday that it wants to use the proceeds from the notes due 2020 for general corporate purposes.

The rating comes after Fitch downgraded U.S. Steel's rating on Jan. 27, reflecting what Fitch said is a lack of visibility into the strength of the economic recovery and timing of the company's return to profitability. The downgrade included the possibility that the company, one of the world's largest steel producers, would need financing in the near term for part of its capital spending over the next two to three years.

Fitch currently has an issuer default rating of "BB+" on U.S. Steel, a rating of "BBB-" on U.S. Steel's senior secured credit facility and a rating of "BB+" on U.S. Steel's senior unsecured notes.

The rating outlook is "stable," reflecting Fitch's view that U.S. Steel's liquidity is sufficient to support operations should the recovery remain weak for the next year to 18 months.

Fellow ratings agency Moody's Investor Services assigned a rating of "Ba2" on the $500 million offering.

At the same time, Moody's upgraded the ratings on U.S. Steel's senior unsecured notes, pollution control revenue bonds and convertible notes due 2014 to "Ba2" from "Ba3." Moody's affirmed the company's "Ba2" corporate family rating and probability of default rating.

The rating outlook remains "negative."

The upgrade reflects the change in the company's capital structure in that secured debt and administrative and priority claims now make up a smaller proportion of the total liabilities.

The upgrade on the corporate family rating reflects what Moody's says is its expectations that debt protection and leverage ratios will improve as this year progresses, but will continue to be relatively weak.

Meanwhile, Standard & Poor's Rating Service assigned a rating of "BB and a recovery rating of "3" on the notes, indicating its expectation of a 50 percent to 70 percent chance for recovery in the event of a default.

U.S. Steel's shares rose $1.24, or 2 percent, to $61.93 in afternoon trading.