RIO DE JANEIRO, Oct 27 (Reuters) - Ratings agency Standard & Poor’s on Tuesday downgraded the foreign debt of Brazilian steelmaker CSN to BB-minus from BB, saying a further downgrade was possible in the medium term due to a depreciated local currency and a depressed steel market.
Cia Siderurgica Nacional SA, as CSN is formally known, is struggling with falling cash flows at a time when its dollar-denominated debt is becoming more expensive to pay due to the weakening real. The company is expected to post a net loss for the third quarter when it publishes results on Thursday.
Shares in CSN were down 0.2 percent in Sao Paulo after the downgrade. CSN said it would not comment on the announcement.
S&P noted that 45 percent of CSN’s debt is denominated in foreign currency and said the company’s total debt could rise by 5.8 billion reais ($1.5 billion) by the end of the year, considering an exchange rate of 4 reais to the dollar.
Credit metrics at Brazil’s second-largest producer of flat steel “should continue to weaken for the next few quarters and won’t improve significantly at least until 2017,” S&P said.
The agency added CSN is unlikely to close many asset sales in 2015 due to difficult market conditions.
($1 = 3.902 reais)
Reporting by Stephen Eisenhammer; Editing by James Dalgleish