Fitch may cut Gerdau Acominas

Fitch Ratings said it placed the ratings of Gerdau SA and related entities on Rating Watch negative, including its BBB- foreign-currency issuer default rating, BBB- local-currency issuer default rating, AA+(bra) national scale rating and the BBB- rating on its $600 million 8.875% guaranteed perpetual notes.

Fitch said it also placed on Rating Watch negative the BBB- local- and foreign-currency issuer default ratings of Gerdau's Brazilian operating subsidiary, Acominas, and its national scale rating of AA+(bra), along with the BBB local- and foreign-currency issuer default ratings of Brazilian Steel Importer Ltd. and the BBB rating on the series 2003-A and series 2004-A secured export note issuances.

The watch placement follows the announcement by Gerdau Ameristeel Corp. that it has reached an agreement to acquire Chaparral Steel Co. in a transaction that values the equity of Chaparral at $4.2 billion. The company said it intends to fund the acquisition with a mix of debt and equity.

Positively, the transaction would strengthen Gerdau Ameristeel's business position in the competitive North American steel market, Fitch said.

But, there is uncertainty about the ultimate financing structure that will be pursued by Gerdau Ameristeel, the agency said, and concern that Gerdau may need to raise a material amount of debt.

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