* Aims to cut net debt to $17 bln by mid-2013
* Credit at junk rating with S&P, Moody's, Fitch
* Moody's says no immediate impact, demands more
* Notes to have 3-yr maturity, coupon 5.875 to 6.375 pct
* Shares down 3 pct, biggest losers in FTSEurofirst 300
(Updates after conference call, adds Moody's)
By Philip Blenkinsop
BRUSSELS, Jan 9 ArcelorMittal SA, the
world's largest steelmaker, will issue $3.5 billion of shares
and convertible notes to sharply reduce the heavy debts that led
to a cut in its credit rating to "junk" status.
The company said on Wednesday the issue, the exact make-up
of which is yet to be determined, would help to reduce its net
debt to about $17 billion by the end of June from an expected
$22 billion at the end of 2012.
It would also reduce the need for further large disposals.
"We are parking the balance sheet issue now. We are also
parking to some degree the asset divestment process," Chief
Financial Officer Aditya Mittal told a conference call.
He also confirmed ArcelorMittal had bid for assets German
rival ThyssenKrupp has put up for sale - most likely
the steel plant in Alabama - and said this would not compromise
the debt reduction target.
However, credit rating agency Moodys's said the cash-raising
would have no immediate impact on ArcelorMittal's rating, adding
the company needed to do more to support its reduced Ba1 status.
ArcelorMittal shares, barely changed before the
announcement, were down 3.3 percent at 12.98 euros at 1610 GMT,
making them the weakest in the FTSEurofirst 300 index of leading
European stocks at that time.
Chairman and Chief Executive Lakshmi Mittal said the new
issue, along with asset disposals, a planned reduction in
dividends and cost savings would bring forward the achievement
of a medium-term debt target of $15 billion.
He repeated a forecast for ArcelorMittal to make a core
profit (EBITDA) of $7 billion in 2012, against $10.1 billion a
Analyst Maarten Bakker at ABN AMRO said the combination of
measures should ensure ArcelorMittal reached this target.
"It looks to be enough to me, $15 billion net debt seems
even on the conservative side on the longer-term view, but it
seems an appropriate measure ... given the fact that the market
has declined structurally in Europe," Bakker said.
Seth Rosenfeld at brokerage Jefferies said the move was
painful in the short term but should help ArcelorMittal put its
debt problems behind it this year. He added the share sell-off
was to be expected but was not dramatic given a 16 percent rally
since late November.
"Many investors seem to recognise that much of the positive
sentiment behind the steel sector as a whole is gradually fading
as iron ore prices have likely topped out and steel price
increases may decelerate moving through the first quarter,"
ArcelorMittal said the mandatory convertible subordinated
notes would have a maturity of three years and pay a coupon in
the range of 5.875 to 6.375 percent. The Mittal family intends
to pump $600 million into the new shares and notes.
Moody's said the stock and note issue - as well as the
recent sale of a stake in a Canadian mining operation - were
positive, but did not affect ArcelorMittal's rating because
Moody's had already factored them into its November downgrade.
"Moody's believes the company needs to reduce debt further
in order to support the Ba1 rating and will maintain its
negative rating outlook until that happens and the global
economy and steel market conditions begin to improve," it said.
ArcelorMittal, formed in 2006 when Mittal's steel business
bought European peer Arcelor, last month wrote down the value of
its European business by $4.3 billion following an 8 percent
slump in European demand in 2012 and no sign of a quick
The $500 billion-a-year steel industry, a gauge of the
global economy, slowed sharply last year as a slowdown in China
combined with weak demand in Europe, where austerity drives have
cut demand for cars and construction, steel's top markets.
The World Steel Association in October forecast steel demand
would rise 2.1 percent in 2012, down from 6.2 percent in 2011.
ArcelorMittal makes between 6 and 7 percent of the world's
steel, principally in Europe and the Americas.
The Luxembourg-based group has scaled back investments and
made a number of divestments in the past year, but has 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 in 2012, saving $860 million.
A week ago, it said it would sell a 15 percent stake in
ArcelorMittal Mines Canada for $1.1 billion, having in December
ceded a 20 percent stake in Canada's Baffinland Iron Ore
It has also been in a battle with the French government over
the planned closure of two blast furnaces.
(Additional reporting by Ben Deighton and Robin Emmott; Editing
by Rex Merrifield and David Holmes)