Research Update: Cleveland-Cliffs Inc. Downgraded To 'B' On Merger With AK Steel Corp., Outlook Stable; New Debt Ratings Assigned

U.S.–based iron ore producer Cleveland-Cliffs Inc. (Cliffs) has entered into a definitive agreement to acquire all shares of AK Steel Holding Corp. common stock. As part of the transaction, Cliffs will be refinancing or exchanging essentially all of AK Steel's debt (totaling approximately $2 billion) and consolidating it, with Cliffs as the borrower. We expect that Cliffs will have adjusted leverage above our current 4x downside trigger, due to a lower margin profile and the increased debt. As a result, we are lowering our issuer credit rating on Cliffs to 'B' from 'B+' and removing it from CreditWatch with negative implications. At the same time, we are lowering the issue-level ratings on Cliffs' senior secured debt to 'BB-' from 'BB'

...- U.S.¡based iron ore producer Cleveland-Cliffs Inc. (Cliffs) has entered into a definitive agreement to acquire all shares of AK Steel Holding Corp. common stock. - As part of the transaction, Cliffs will be refinancing or exchanging essentially all of AK Steel's debt (totaling approximately $2 billion) and consolidating it, with Cliffs as the borrower. - We expect that Cliffs will have adjusted leverage above our current 4x downside trigger, due to a lower margin profile and the increased debt. - As a result, we are lowering our issuer credit rating on Cliffs to 'B' from 'B+' and removing it from CreditWatch with negative implications. - At the same time, we are lowering the issue-level ratings on Cliffs' senior secured debt to '##-' from '##' and assigning a '##-' issue-level rating to the new $550 million senior secured notes. In addition, we are lowering the issue-level ratings on Cliffs' senior unsecured debt to 'B' 'from 'B+'. We are also assigning a 'B' issue-level rating to the...

Research Update