Member access

4-Traders Homepage  >  News  >  Business Leaders  >  All news

Business Leaders

Latest NewsCompaniesMarketsEconomy & ForexCommoditiesHot NewsMost Read NewsRecomm.Business LeadersVideosCalendar 
HomeAll newsMost read newsBusiness Leaders Biography 
Lakshmi Mittal
Country of residence : United Kingdom
Birthday : 06/19/1950
Linked companies : Goldman Sachs Group Inc - ArcelorMittal SA

ArcelorMittal Combined Offering of Shares, Notes Over-Subscribed

01/10/2013 | 03:39pm US/Eastern

--ArcelorMittal raises $4 billion from combined offering versus initial expectation of $3.5 billion

--Combined offering of common shares and mandatorily convertible notes multiple times over-subscribed

--Proceeds to be used to help reduce net debt to $17 billion by June end

--Convertible notes more heavily subscribed than equity but strong interest in both, says Goldman

(Updates with details of completed offering, and adds comments from analysts, Goldman Sachs and ArcelorMittal executives.)

By Alex MacDonald

LONDON--ArcelorMittal (>> ArcelorMittal) said it has raised $4 billion from a combined offering of common stock and convertible notes--more than initially expected-- and plans to use the proceeds to strengthen its balance sheet as it endures lackluster steel demand.

ArcelorMittal raised $1.25 billion from the issue of common shares and $2.25 billion from notes that pay a 6% coupon annually. The notes will be reimbursed with shares when they mature in three-years' time. ArcelorMittal had originally planned to raise $3.5 billion from the offering, a sign of strong investor appetite for the securities and expectations that steel demand will pick up given improving macro-economic indicators in many regions of the world.

"We are pleased with how it went. The offering was multiple times over-subscribed," said Alasdair Warren, head of European Equity Capital Markets at Goldman Sachs, the sole global coordinator of the offering. "It's pretty extraordinary," he noted. Demand was "at the upper end or our expectations," he added.

The Mittal family agreed to invest $600 million in the offering, split equally between common shares and convertible notes, a move which steel analyst Jeff Largey of Macquarie Research said will dilute the family's 41% holding in the company. The Mittal family's investment in the offering was equal to only 15% of the total amount raised.

ArcelorMittal said it will use the proceeds alongside the $1.1 billion sale of a 15% stake in its iron ore unit, ArcelorMittal Mines Canada, to reduce its net debt to $17 billion by the end of June from an estimated $22 billion in 2012. The net debt target takes into account a bid submitted to German steelmaker ThyssenKrupp AG (>> ThyssenKrupp AG) that reflects its interest in Thyssen's Alabama steel plant, according to Financial Chief Aditya Mittal.

The combined offering is expected to support the company's return to an investment grade credit rating in due course following a downgrade to junk status last year by the world's three largest credit ratings companies.

Moody's Investors Service, which had warned that the company was at risk of breaching a credit-facility covenant unless it reduced debt or increased profitability, said the action was "credit positive" and would help relieve concerns about the company's ability to comply with its covenant under the prevailing soft steel market.

Still, it said it would maintain its negative rating outlook until the company reduces debt further "and the global economy and steel market conditions begin to improve."

Meanwhile Fitch Ratings, another credit ratings company, said the offering would "moderately improve [ArcelorMittal's] liquidity position," but added that the convertible notes would be treated as debt rather than equity given its credit rating criteria.

The combined offering should significantly reduce debt and allay concerns about the company's balance sheet, laying the groundwork for the stock price to rise when steel demand recovers, said Credit Suisse in a note.

"The take away from the capital raise...is that we are parking the balance sheet issue," said Mr. Mittal, ArcelorMittal's financial chief. "We are also parking to some degree, the asset divestment process because we do not believe we need to be divesting significant amounts of assets to further strengthen the balance sheet," he added.

Mr. Warren said investors were attracted to the offering "by the fact that they could own stock in a company which now has a very robust balance sheet and the fact that the company's shares may start to benefit from the recent improvement in macro-economic indicators."

From ArcelorMittal's perspective, the steelmaker chose to make a combined offering in order to allow shareholders to buy straight equity if desired while at the same time taking advantage of the strong demand for convertible notes at the moment, a company spokeswoman said. The mandatory convertible notes have the benefit of minimizing equity dilution should the share price rise and the coupon payments are tax deductible, ArcelorMittal CEO Lakshmi Mittal said.

Aditya Mittal said the steel market outlook is improving with leading indicators in several regions rising over the last few months. Europe was the exception, although a technical rebound in demand there had prompted ArcelorMittal to restart two blast furnaces, one in Dunkerque, France and another in Asturias, Spain, he noted.

-John W. Miller in Pittsburg contributed to this story.

Write to Alex MacDonald at alex.macdonald@dowjones.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

Stocks mentioned in the article : ArcelorMittal, ThyssenKrupp AG
React to this article
Latest news about Lakshmi Mittal 
Nazarbayev, CEO ArcelorMittal discuss activities of company in Kazakhstan
12/12 - President of Kazakhstan Nursultan Nazarbayev has met today with CEO ArcelorMittal Lakshmi Mittal in Astana, the press service of the President reported. The activities of the company in Kazakhstan were touched u
Sudhir Maheshwari to leave ArcelorMittal
10/30 - ENP Newswire - 30 October 2014 Release date- 29102014 - ArcelorMittal announces today that Sudhir Maheshwari, member of the Group Management Board, with responsibility for corporate finance; merg
ArcelorMittal's M&A, China, India Head Sudhir Maheshwari To Leave March 31
10/28 - By Alex MacDonald LONDON--Steel titan ArcelorMittal said Tuesday that Sudhir Maheshwari, head of mergers and acquisitions, corporate finance, risk management, India and China will leave the steel maker on March 31, 2015 to pursue o...
JSW Steel, ArcelorMittal in talks to acquire Italy's largest steelmaker Ilva steel plant
09/08 - MUMBAI: Mumbai Race to buy troubled steel plants in Italy has pitted Indian business tycoon Sajjan Jindal against global steel magna
Advertisement
Popular Business Leaders 
Sheldon Adelson Paul Allen Mukesh Ambani Bernard Arnault Luc Besson Vincent Bolloré Martin Bouygues Richard Branson Warren Buffett Marc De Lacharrière Benjamin De Rothschild Jean-baptiste Descroix-vernier Barry Diller Bill Gates Philip Green Carl Icahn Steve Jobs Li Ka-shing Arnaud Lagardère Peter Lynch Lakshmi Mittal Rupert Murdoch Zong Qinghou Patrick Ricard Naguib Sawiris Carlos Slim George Soros Donald Trump Guy Wyser-pratte Jerry Yang
A-Z Business Leaders
Most Read News 
Oil Price Decline is Good for U.S. Economy
5 days ago - By Ben Leubsdorf WASHINGTON--The global decline in oil prices is good for the U.S. economy, Federal Reserve Chairwo...
Nippon to up Reliance MF stake to 49%; Rs 657 cr for first 9%
5 days ago - Japanese financial services giant Nippon will hike its stake in India's top fund house Reliance Mutual Fund from 26 perce...
Aaron Sorkin wanted Tom Cruise to play lead in Steve Jobs biopic
1 day ago - Washington, Dec 10 : Emails leaked in the Sony breach has revealed that Aaron Sorkin originally wanted Tom Cruise to pla...
Fed's Yellen Heard Across Asia -- Barron's Asia
4 days ago - By Thomas Streater It was the word that echoed across Asia: patient. Twitchy Asian markets, which have brac...
MySale rallies as founder eyes £3m share-buy
4 days ago - MYSALE shares recovered some lost ground yesterday after one of the founders of the flash sales website pledged to buy &p...
More news
Dynamic quotes  
ON
| OFF