CSN Seeks to Reduce Debt by Selling 11% Stake in Mining Subsidiary to Japanese Partner

Companhia Siderúrgica Nacional (CSN), a major Brazilian steelmaker, has announced plans to sell a significant portion of its mining subsidiary. The company aims to offload up to 11% of CSN Mineração to Itochu Corporation, a Japanese trading giant.

This move comes as part of CSN’s ongoing efforts to decrease its debt burden and improve its financial health. CSN revealed on Wednesday that it had signed a non-binding agreement with Itochu for the potential sale.

The deal’s value remains undisclosed, but based on CSN Mineração’s recent stock price, the stake could be worth around R$3.59 billion ($641 million).

Itochu already holds a 9.26% share in CSN Mineração, making it the second-largest shareholder after CSN itself. The proposed transaction aligns with CSN’s strategy to reduce its leverage.

At the end of the second quarter, the company’s consolidated net debt stood at R$37 billion ($6.61 billion). This figure translates to a leverage ratio of 3.36 times the relationship between net debt and EBITDA over the past 12 months.

CSN Mineração operates the Casa de Pedra iron ore mine in Minas Gerais state. The subsidiary has become a crucial revenue generator for CSN since its formation in 2015.

Other minority shareholders in CSN Mineração include South Korea’s Posco and China Steel Corporation, holding 1.86% and 0.41%, respectively.

CSN Mineração and Itochu Navigate a Volatile Market

The potential sale to Itochu will not affect CSN Mineração’s governance or control structure, according to CSN. However, the deal’s completion depends on several factors.

These include approvals from both companies, the signing of definitive agreements, and clearance from Brazil’s antitrust regulator, CADE. CSN’s stock reacted positively to the news, with shares rising 0.77% on the day of the announcement.

In contrast, CSN Mineraço’s stock experienced a slight dip of 0.17%. Both companies have seen significant declines in their stock prices this year, with CSN down 36% and CSN Mineração down 20% on the B3 stock exchange.

The potential sale represents a strategic move for both CSN and Itochu. For CSN, it offers an opportunity to reduce debt and improve financial flexibility.

Itochu, on the other hand, could secure a larger stake in a key iron ore producer, enhancing its position in the global commodities market.

This deal highlights the ongoing challenges faced by steel and mining companies in a volatile global market. It also underscores the importance of strategic partnerships and financial restructuring in maintaining competitiveness.

As the industry continues to evolve, such moves may become increasingly common among major players seeking to optimize their operations and financial positions.

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