S&P upgrades United States Steel

Standard & Poor's said it raised United States Steel Corp.'s corporate credit and senior unsecured debt ratings to BB+ from BB and removed them ratings from CreditWatch, where they were placed with positive implications on July 27, 2006.

The outlook is stable.

The agency said the upgrade reflects United States Steel's strong financial performance, improved balance sheet and significant position in the North American steel market. Benefiting from nearly three years of favorable steel market conditions, the company has experienced strong profitability and healthy cash flows that have allowed it to improve its financial leverage while prudently financing its growth, modernization and efficiency initiatives. S&P predicted that United States Steel's improved cash flow prospects and balance sheet should enable the company to maintain credit measures indicative for the current rating throughout the steel business cycle.

The ratings also reflect the company's capital-intensive operations, exposure to highly cyclical and competitive markets, increased input costs, a high degree of operating leverage and aggressive financial leverage, including underfunded postretirement benefit obligations, S&P said. For the 12 months ended Sept. 30, the adjusted debt-to-EBITDA ratio was 1.4x, though the agency said this reflects the high point in the cycle and it expects the ratio to average at a lower, but adequate, level in the future.

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