Moody's downgrades steelmaker ArcelorMittal

The world's largest steel company ArcelorMittal has seen its credit ratings downgraded by Moody’s.

In an advisory to clients at the close of markets on Thursday, the ratings agency said ArcelorMittal's corporate family rating (CFR) and probability of default rating (PDR) had been downgraded to Ba2 and Ba2-PD from Ba1 and Ba1-PD, respectively, primarily reflecting the steelmaker's “weaker operating performance since the beginning of 2015 as a result of falling steel prices, and a material decrease in EBITDA from its mining operations”.

At the same time, Moody's also downgraded ArcelorMittal's senior unsecured ratings to Ba2 from Ba1.

“The outlook on all the ratings is negative with limited opportunity for ArcelorMittal to experience a rebound in profitability over the next 12 months,” a spokesperson said.

Apart from having to contend with a challenging climate in the steel industry, ArcelorMittal also has to absorb a material EBITDA shortfall from its mining operations of 66% compared to the third quarter of 2014, which have in the past contributed up to an average of 25% of the group's consolidated EBITDA.

Moody’s added that its downgrade also reflects the current recession in ArcelorMittal's Brazilian market and a challenging operating climate in North America.

On a more positive footing, Moody's believes ArcelorMittal's liquidity is solid and expects that it will remain adequate in 2016 as evidenced by "the large amount of cash held on the balance sheet" and the committed facilities available to the company.

ArcelorMittal has $2bn worth of debt maturing in 2016, which Moody's expects will be met without putting excessive pressure on the company's cashflow.