Fitch Puts Gerdau on Watch Negative

Fitch has placed Gerdau’s ratings on watch negative following the announcement of its acquisition of MACSTEEL, on concerns that the Brazilian steelmaker would fund the transaction with cash and debt and no equity. “Absent significantly higher steel prices in the near term, this acquisition would increase the company’s leverage and further weaken its ability to reduce leverage from the levels reached recently after acquiring Chaparral Steel Company,” Fitch says in a release. The agency has a foreign and local issuer rating of BBB minus for Gerdau and the steelmaker’s 2017 and perpetual bonds, of which there is $1.6bn outstanding. Separately, S&P affirmed its BBB minus mark, with a negative outlook.