ARCELORMITTAL, Lakshmi Mittal’s heavily-indebted steel group, yesterday unveiled a £2.2bn offer of shares and mandatorily convertible loan notes in the first major equity capital markets deal of the year.
The deal, which was arranged by Goldman Sachs, BofA Merrill Lynch, Credit Agricole and Deutsche Bank, will enable the steel giant to reduce its net debt from around $22bn (£13.7bn) as of the year end to $17bn by the end of June. Mittal, whose family is supporting the offering by placing an order for $600m of equity, said: “We have consistently said that reducing net debt is a priority for the company.”
Mittal is a Goldman Sachs board member.
ArcelorMittal has been struggling recently amid a fall in demand for steel, and last month wrote down the value of its business by $4.3bn.
The mandatory convertible notes will mature in three years when they will be converted into shares in ArcelorMittal. They are expected to pay a coupon of between 5.875 per cent and 6.375 per cent per annum in the meantime. This is the second major deal incorporating mandatory convertible notes in the last few weeks after a drought since 2009. BofA Merrill Lynch led on a £2.5bn deal for carmaker VW in November.
The steel giant has scaled back investments and made a number of divestments in the past year, but has really upped its debt-cutting efforts since Standard & Poor’s became the first credit agency to cut the group’s rating to junk in August. It slashed its dividend to $0.20 per share this year, from $0.75 paid out in 2012, saving $1bn.
The books were covered within three hours and there was talk of increasing the deal size last night to $4bn.