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According to the company, these issues are aimed at reducing its debt to levels close to its medium-term target (US$ 7 Bn; vs. US$ 9.5 Bn at the end of 1Q’20) and to have a more comfortable position in the light of the complicated current environment.
In summary, negative news that comes as a surprise bearing in mind its comfortable liquidity position (US$ 10 Bn vs. around US$ 4 Bn of maturities in 2020/21) and the reduction of cash break-even to US$ 3.5 Bn (US$ -1 Bn vs. previous guidance) recently confirmed by the company. Thus, we believe that this reason could be explained by extended prospects of macroeconomic weakness and by the recent rating cut to non-investment grade by Moody’s and Fitch. Our current T.P. is Under Revision, but based on our previous valuation (€ 18.50/sh.), and assuming the convertible bond issue as a deferred rights issue at an average reference price of ~ €8.00/sh. (-22% vs. yesterday’s close), the dilutive impact on our T.P. would be -12.4% (vs. -12% at current levels).
ARCELOR MITTAL: RIGHTS AND CONVERTIBLE BOND ISSUE (ANÃLISIS BANCO SABADELL)
The company has just announced a rights issue and mandatory convertible bond issue worth US$ 2 Bn (22% of its market cap), without specifying the proportion of both operations. The bond has a 3Y maturity and a coupon of between 5.25% and 5.75% (to be determined yet). The price of the rights issue and/or the bond conversion has not been made public yet.According to the company, these issues are aimed at reducing its debt to levels close to its medium-term target (US$ 7 Bn; vs. US$ 9.5 Bn at the end of 1Q’20) and to have a more comfortable position in the light of the complicated current environment.
In summary, negative news that comes as a surprise bearing in mind its comfortable liquidity position (US$ 10 Bn vs. around US$ 4 Bn of maturities in 2020/21) and the reduction of cash break-even to US$ 3.5 Bn (US$ -1 Bn vs. previous guidance) recently confirmed by the company. Thus, we believe that this reason could be explained by extended prospects of macroeconomic weakness and by the recent rating cut to non-investment grade by Moody’s and Fitch. Our current T.P. is Under Revision, but based on our previous valuation (€ 18.50/sh.), and assuming the convertible bond issue as a deferred rights issue at an average reference price of ~ €8.00/sh. (-22% vs. yesterday’s close), the dilutive impact on our T.P. would be -12.4% (vs. -12% at current levels).
Underlying
ArcelorMittal
Provider
Sabadell
Francisco Rodriguez
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