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S&P puts Algoma on positive watch
S&P said it placed all its ratings on Algoma Steel Inc., including its CCC+ issuer rating, on CreditWatch with positive implications.
The placement follows the announcement Algoma plans to merge with special-purpose acquisition company Legato Merger Corp.
Proceeds are expected to be about U.S.$306 million in cash, which will be used to finance Algoma's growth investments.
“We are now assuming an average hot rolled coil (HRC) benchmark price of about U.S.$850 per metric ton (/mt) in fiscal 2022 and U.S.$700/mt in fiscal 2023 for unsettled future shipments. Based on these assumptions, we estimate Algoma will reduce and maintain adjusted debt to EBITDA well below 5x over the next two years,” S&P said in a press release.
The positive CreditWatch placement reflects the likelihood the agency could raise Algoma’s issuer rating by one notch.
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