Cleveland-Cliffs Inc.'s Proposed Senior Unsecured Notes Rated 'BB-' (Recovery Rating: '3')

NEW YORK (S&P Global Ratings) April 11, 2023--S&P Global Ratings today assigned its 'BB-' issue-level rating and '3' recovery rating to U.S.-based steel maker Cleveland-Cliffs Inc.'s proposed senior unsecured guaranteed notes. For the complete issuer credit rating rationale, please see our most recent research update on Cleveland-Cliffs, published March 14, 2023, on RatingsDirect. ISSUE RATINGS--RECOVERY ANALYSIS Key analytical factors Cleveland-Cliffs' capital structure includes a $4.5 billion ($1.8 billion outstanding as of Dec. 31, 2022) asset-based lending (ABL) credit facility (not rated). The company upsized this facility from $3.5 billion in December 2021. We assigned our 'BB-' issue-level rating and '3' recovery rating to the company's proposed $750 million senior unsecured guaranteed notes due 2030. The '3' recovery rating indicates our

...subsidiaries of the company. - Our 'B' issue-level rating and '6' recovery rating on the company's subordinated debt are unchanged. The '6' recovery rating indicates our expectation for negligible recovery in the event of payment default (0%-10%; rounded estimate: 0%). - The company redeemed its $294 million outstanding senior unsecured convertible notes in the first quarter of 2022 and currently has $235 million of outstanding senior unsecured notes that are not guaranteed (as of Dec. 31, 2022), which we consider subordinated to the guaranteed notes. - Our hypothetical bankruptcy assumes steel prices drop significantly due to cheaper Chinese imports and intense domestic price competition. Under this scenario, Cleveland-Cliffs draws on about 60% of the ABL credit facility less assumed undrawn letters of credit. - We assess the company's recovery prospects on a going-concern value of about $6.4 billion. - We base our enterprise value (EV) on an emergence EBITDA of $1.1 billion and a 5.5x...

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