Moody’s upgrades Gerdau to Ba2

Moody's Investors Service said it upgraded Gerdau SA's corporate family rating to Ba2 from Ba3, along with the ratings of the debt issues of Gerdau Trade Inc. and of GTL Trade Finance Inc., as well as the industrial revenue bonds issued by Jacksonville Economic Development Commission, Fla. and the solid waste disposal bonds issued by St. Paul Port Authority, Minn.

All debt issues are guaranteed by Gerdau.

The outlook is stable.

Moody’s said the upgrade reflects the company's debt reduction and liability management efforts, which have intensified since October and will lead to a much faster deleverage than previously anticipated.

In October 2017, Gerdau issued $650 million in 10-year bonds, and used the proceeds for a $590 million tender offer for its 2020, 2021 and 2024 bonds. Gerdau amortized its $790 million in bonds due in October 2017.

On Jan. 2, the company announced the sale of its rebar operations in the United States for $600 million, which Gerdau anticipates will be concluded in the next six to nine months and the proceeds will be used for debt amortization, the agency explained.

“Pro forma for such events and including our standard adjustments for pension and other liabilities, Gerdau’s adjusted debt/EBITDA ratio as of September 2017 would decline to 4.2x from 5.4x,” Moody’s said in a news release.

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