Standard and Poor’s downgrades ArcelorMittal rating to junk

“We are lowering the long- and short-term ratings on ArcelorMittal to ‘BB+/B’ from ‘BBB-/A-3’. The negative outlook reflects the uncertainty related to the extent of the company’s planned near-term debt reduction as well as the weak steel environment,” S&P said in a statement.

As per the rating criteria devised by S&P,BBB-rating is the lowest level for an investment grade rating and any thing below BBB level is considered as sub-investment grade.

In industry parlance,bonds with sub-investment grade are known as ‘junk’ bonds and require attractive returns to sell. Announcing the results for June quarter,the world’s largest steelmaker had said that retaining the investment grade rating is its top priority. For the April-March quarter,ArcelorMittal’s gross earnings (EBITDA),at $2.4 billion,was largely in line with the market expectations. Besides,it had a net debt of $22 billion at the end of the quarter.

However,S&P said that ArcelorMittal’s results for the April-June quarter were “somewhat below our previous expectations,and we now forecast the company’s credit ratios will remain weak”.