ArcelorMittal resets financing

ArcelorMittal SA, the world's largest steel maker, said its loan terms have been loosened, with bankers agreeing not to increase borrowing costs as long as its debt-to-earnings ratio stays under a new, higher limit.

The company is carrying a large amount of debt from recent expansion and has posted large losses in its last two quarters, as the global economic downturn caused demand to plummet for steel used in buildings, bridges, cars and machinery.

It said the risk of a worse downturn means it needs more flexibility from its main bankers by changing the financial leverage covenant linked to $24.02 billion credit facilities, a $4 billion revolving credit facility and a $3.25 billion forward start facility.

A covenant sets conditions for what a business must do to secure borrowing, such as keeping debt within certain levels.

ArcelorMittal said lenders accounting for 90 percent of that credit had agreed not to increase borrowing costs unless the company's leverage ratio of net debt to earnings before depreciation, impairment expenses and exceptional items rises above 3.5.

The company's ratio in the year ending March 31 was 1.3, higher than 1.1 for the year ending Dec. 31, 2008.

It said no banker had refused its request and it was still in talks with some. The company said it did not anticipate breaching the existing covenant.

Despite recent quarterly losses, the company is planning to pay off $10 billion in debt by the end of this year. It has raised more than $11 billion from selling shares and bonds.

ArcelorMittal had debt of $26.7 billion on March 31, largely a result of an aggressive expansion program after the company was formed from Mittal Steel Co.'s 2006 takeover of Arcelor.

It also plans to trim running costs by $2 billion and says it has saved $6 billion by halving output in the first quarter - and will save more than $7.5 billion in the second quarter.

ArcelorMittal owns the steel plant in Weirton.

An arbitrator has ruled AK Steel would violate its labor agreement with the United Steelworkers of America if it closes its plant in Ashland while continuing to operate another mill in Portsmouth.

The Independent in Ashland reported the 36-page ruling was issued Wednesday by arbitrator Raymond J. Sekula and that it sustained a grievance filed by the union against the steelmaker.

The company announced in May that it intends to shut down the Ashland plant this month for the rest of 2009.

AK Steel spokesman Alan McCoy told The Independent the company was still analyzing the ruling and reserved comment.

Steelworkers Local 1865 President Doug Campbell said the ruling doesn't prevent the plant closing, but does reaffirm the union contract.

Rio Tinto PLC, the world's third largest mining company, said iron ore production rose 8 percent in the second quarter and that it expects a recovery in Chinese steel demand in the second half of the year.

Rio Tinto Chief executive Tom Albanese said production cuts announced by the miner in January in response to falling demand were beginning to take effect.

''Markets remained tough in the second quarter, as expected, particularly in aluminum,'' Albanese said. ''We continue to press ahead with actions to reduce costs across the board, align production with demand, and bring down levels of net debt.''

Metal-processing company Worthington Industries Inc. moved to a loss in its fiscal fourth quarter as the global recession took its toll.

For the quarter ended May 31, Worthington recorded a loss of $13.7 million, or 17 cents per share, compared with a profit of $53.9 million, or 68 cents per share, in the same quarter last year.

The recent quarter's results included a $6.3 million pretax inventory writedown and $6 million in pretax restructuring charges, resulting in charges of 15 cents per share.

The prior-year period included $4.9 million in pretax restructuring charges that reduced earnings by 4 cents per share.

Sales tumbled 46 percent to $471.6 million from $868.9 million, as the continued declines in the automotive and home construction industries kept customers away.

For the full fiscal year, Worthington posted a loss of $108.2 million, or $1.37 per share, compared with a 2008 profit of $107.1 million, or $1.31 per share.

Rio Tinto Ltd. says bribery allegations against four of its employees detained in China are ''wholly without foundation.''

In a statement Friday, the company says the employees acted with integrity at all times.

''Rio Tinto will continue to work to support the employees and their families and colleagues,'' the statement said.

The four employees, including an Australian executive, were detained July 5 while Rio was acting as lead negotiator for global iron ore suppliers in price talks with Chinese steel mills.

Chinese state media say they are accused of bribing employees of Chinese steel companies to obtain confidential information on China's negotiating strategy.

According to the Japan Metal Bulletin, Nippon Steel is restarting a blast furnace at its Oita iron works on Aug. 2. Nippon Steel's crude steel output decreased by 45 percent to 4.67 million tons for the first quarter, compared with the first three months of 2008.

(Steel Talk is compiled from various sources and is edited by Business Editor Paul Giannamore. His e-mail address is pgiannamore@heraldstaronline.com.)