(Adds details on Usiminas, share price rise)
By Alberto Alerigi Jr
SAO PAULO, Feb 15 (Reuters) - Nippon Steel & Sumitomo Metal Corp would be willing to participate in a capital increase for ailing Brazilian steelmaker Usinas Siderúrgicas de Minas Gerais SA if an understanding with other shareholders were reached in principle, a source with direct knowledge of the matter said on Monday.
The source, who spoke under condition of anonymity due to the sensitivity of the issue, said that an accord between Nippon Steel and Techint Group - the other controlling shareholder of the steelmaker known as Usiminas - for a capital injection may not happen before Usiminas releases fourth-quarter results on Thursday.
Reuters reported on Friday that Usiminas is in talks with four major banks to refinance about 4 billion reais ($1 billion) in loans maturing in the next two years. Sources said that Itaú Unibanco Holding SA, Banco Bradesco SA, Banco Santander Brasil SA and Banco do Brasil SA demand the company be capitalized prior to any debt relief plan.
However, a rift between Nippon Steel and Techint is making it tougher for Usiminas to raise new capital. The company promised to send a response to lenders on Feb. 17, a day before Usiminas is scheduled to report quarterly results.
Techint is unlikely to inject additional money into Usiminas without other shareholders' agreement. If Techint refused to participate in a capital injection, Nippon Steel could pay for it all alone - a move that could dilute Techint, Reuters reported last week.
At stake is the survival of Usiminas, founded 53 years ago to supply flat steel products to Brazil's auto and home appliance industries located in the state of Minas Gerais. The state government is considering extending tax relief and an emergency credit line to Usiminas, O Tempo newspaper reported.
Minas Gerais has tried unsuccessfully to broker an accord between Nippon Steel and Techint, which would allow Usiminas to win better repayment terms from banks, Marco Antônio Castello Branco, president of state development agency Codemig, told O Tempo.
Still, the iron ore-rich state currently lacks the necessary financial resources to provide support to the company, the source told Reuters.
Non-voting shares of Usiminas jumped 5.9 percent to 0.90 reais on Monday. The stock is down 77 percent over the past 12 months.
Usiminas hired Credit Suisse Group AG in November to sell Usiminas Mecanica, a division that produces customized steel products for industrial clients.
According to the source, the sale of the division could raise between 300 million reais and 700 million reais for Usiminas.
Codemig declined to confirm Castello Branco's comments. Usiminas, Nippon Steel and Techint all declined to comment.
$1 = 3.9863 Brazilian reais Reporting by Alberto Alerigi Jr; Editing by Guillermo Parra-Bernal, Alan Crosby and Bill Rigby