* Cuts Thyssen to Ba1 from Baa3, outlook negative
* Cites tough market, uncertainty over Americas sale
* Says Steel Americas price could be below book value
* Says sale of Steel Americas could be delayed
LONDON, Jan 24 (Reuters) - Credit rating agency Moody's cut ThyssenKrupp's debt to "junk" status, citing challenging market conditions and losses at the German steelmaker's mills in Brazil and the United States.
Moody's said on Thursday it had downgraded Thyssen by one notch to "Ba1", with a negative outlook, from "Baa3".
Thyssen said a strategic programme it initiated last year to improve earnings and reduce debt was on track.
The $500 billion-a-year steel industry, a gauge of the global economy, slowed sharply last year as a cooldown in China combined with weak demand in Europe, where austerity has cut demand for cars and construction.
In addition, Thyssen piled up debt by sinking billions of euros into an ill-advised project in the Americas, which it has been trying to sell.
The two mills that make up Thyssen's Steel Americas business - in Brazil and Alabama - were meant to carve out new markets for Germany's No.1 steelmaker but have suffered from cost overruns, poor project management and weak demand for steel due to the economic downturn.
Thyssen put up loss-making Steel Americas for sale last year, but indicative bids were so low that it was forced to make further impairments.
In the fiscal fourth quarter, it wrote down the value of the mills by almost half to 3.9 billion euros ($5.2 billion), causing a 4.7 billion euro group loss for the year.
Moody's said it saw a risk that Thyssen would get less than book value for Steel Americas from any buyer and that the sale would drag on longer than expected, forcing the company to keep absorbing losses.
Earlier this month, Thyssen said it hoped to wrap up the sale of Steel Americas in its current fiscal year, which ends in September 2013.
At the end of September 2012, its net debt stood at 5.8 billion euros, equivalent to about 1.3 times its equity, though Thyssen said the figure would improve soon thanks to asset sales as part of a major overhaul to reduce its dependence on steel.
Fitch Ratings in December affirmed a rating of BBB- for Thyssen, its lowest investment-grade rating, although with a negative outlook, on the view the company would be successful in selling Steel Americas by end-2013 for at least $3 billion.
Standard & Poor's last year cut Thyssen to BB with a negative outlook.
Aside from its efforts to sell Steel Americas, Thyssen has divested stainless steel unit Inoxum and some smaller holdings such as its the springs and stabilizers business. Once all these deals are done, only about 30 percent of Thyssen's business will come from the steel sector.
"The order books at ThyssenKrupp's capital goods businesses are holding up relatively well," Moody's said.
It said the asset sales, a 2 billion euro savings programme Thyssen announced last month and its push for a more performance-based culture would help stop losses and negative cash flow, though not before the end of the year.
"The negative rating outlook indicates the challenges posed over the next 12 months by the soft European economy and, in particular, lacklustre steel and automotive markets," it said.
Moody's cut the rating of ArcelorMittal, the world's largest steelmaker, to "junk" in November.