08 April 2020 by jbchevrel
Today in Euro IG CDS, macro names were solid (Miners: glen -25 lhn -13 Oil: rdsa -5 repsm -5 total -5). ArcelorMittal (MTNA) isn’t in the Main anymore since s33. MTNA was wider +10bp to 542bp contrasting with peers that are still in the Main s33. MTNA was cut to BB+ by Fitch with a negative outlook on the back of the decline in steel demand and prices this year along with pressure on the auto and construction sectors. Fitch do however say that they think the company “is well-placed to cope with the impact of the COVID” citing $10.4bn of liquidity versus short-term debt of $2.6bn, their track record “of taking decisive action to manage crises” and their inherently countercyclical working capital cycle that should enable them to be free cash flow positive in even the most challenged quarters of this year. They cite FFO net leverage sustainably above 3.3x as a trigger for a downgrade, below 2.3x as a trigger for an upgrade (it was 4.4x in 2019, although Fitch seem to be taking a two-year view). At this time of the year last year, liquidity was ample $2.4B cash on its balance sheet and $5.5B disponible from credit facilities. Net debt was $10B area.