Steel Americas cloud hangs over Germany's ThyssenKrupp

Sun Aug 11, 2013 10:55am EDT
 
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By Maria Sheahan

FRANKFURT (Reuters) - Pressure is growing on ThyssenKrupp (TKAG.DE: Quote) to shore up its strained balance sheet by raising new capital as talks on selling its loss-making steel mills in the Americas drag on.

Once a symbol of German industrial prowess, ThyssenKrupp has been trying for more than year to offload the mills in Brazil and the U.S. state of Alabama, together known as Steel Americas.

With quarterly results due this week, no agreement appears in sight despite its aim for a deal by the end of September. The longer talks last, the more the benefit of any proceeds is eaten up by losses at Steel Americas. These were over half a billion euros in the first half of ThyssenKrupp's financial year alone.

ThyssenKrupp has emphasized it still has 8 billion euros of cash and undrawn credit lines, but analysts say Tuesday's third quarter results could show it is now in breach of some loan covenants, further shrinking the funds available to it.

At the end of March, the firm had 5.3 billion euros of net debt and its equity has been shrinking, prompting Moody's to cut its credit rating to "junk" status earlier this year.

Brazil's Cia. Siderurgica Nacional (CSN) is seen as the most likely buyer of Steel Americas but price is a sticking point. Analysts estimate it may sell for as little as 2.3 billion euros, much less than the book value of 3.4 billion.

Chief Executive Heinrich Hiesinger is likely to be grilled both on the Steel Americas sale and the company's finances during a conference call with analysts on Tuesday evening.

He faces a dilemma. Until the steel mills are sold, the company will struggle to persuade investors to participate in a capital increase that is expected to total between 750 million and 1 billion euros.   Continued...

 
The headquarters of Germany's industrial conglomerate ThyssenKrupp AG are pictured in Essen January 16, 2013. REUTERS/Ina Fassbender