Moody's may up Gerdau

Moody's Investors Service said it placed under review for possible upgrade the Ba1 global-scale corporate family ratings of Gerdau SA and Gerdau Ameristeel Corp., following the announcement of a primary equity issuance by Gerdau of R$3.8 billion to R$4.2 billion.

Gerdau Ameristeel's Ba1 (LGD4, 63%) $23 million of senior notes due 2037 are also under review for possible upgrade.

The review process will focus on the use of the proceeds from the equity issuance and its impact on Gerdau's leverage and capital structure as the group executes its large investment program and continues to face margin pressure from growing production costs and from lower price premiums due to pressure from imports, the agency said.

Gerdau's ratings are supported by its historically solid cash generation, which reflects its strong market position in the several markets where it operates, its good operational and geographic diversity and cost-driven management, Moody's said.

The ratings consider Gerdau's exposure to the cyclicality of the steel industry, the agency added.

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