(The following statement was released by the rating agency)
Feb 14 - Fitch Ratings has clarified its rationale for the treatment of ArcelorMittal S.A’s (AM) recent USD2.25bn mandatorily convertible subordinated notes (MCN) as 100% debt. AM’s ‘BB+’ Long-term Issuer Default Rating (IDR) and ‘B’ Short-term IDR are unaffected by this change. The Outlook on the Long-term IDR is Stable. A full list of AM’s ratings is at the end of this release.
The treatment of the notes continues to be 100% debt. Previously, Fitch attributed this to the presence of a dividend pusher or look-back clause within the draft documentation, which under the agency’s criteria represents a constraint upon the ability of the instrument/issuer to defer interest coupon payments. Following further legal advice and discussion, Fitch no longer considers the terms and conditions of the MCNs contain a dividend pusher or look-back provision. The notes continue to be treated as debt due to the requirement to pay outstanding coupons in cash at the conversion of the notes. In order to receive equity credit under Fitch’s criteria, the outstanding coupons would either have to be able to be deferred through the conversion date or convert into shares.