* 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 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
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
Earlier this month, Thyssen said it hoped to wrap up the
sale of Steel Americas in its current fiscal year, which ends in
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
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.