How Effective Have ArcelorMittal’s Debt Reduction Efforts Been?

+18.86%
Upside
26.45
Market
31.44
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Arcelor Mittal

ArcelorMittal announced a $1.5 billion offer to purchase outstanding notes yesterday, as a part of its ongoing debt reduction efforts. [1] ArcelorMittal, which currently has a speculative grade credit rating from major agencies, has been making a concerted effort to shore up its balance sheet over the course of the past year. In addition, the company has also instituted a number of initiatives to lower operating costs and boost efficiency, amid an environment of subdued steel prices. These initiatives have translated into an improvement in the company’s EBITDA. As a result of the company’s debt and cost reduction efforts, its indebtedness has improved considerably. Assuming that the company buys back $1.5 billion of its debt with cash in its latest round of debt reduction, the company’s net debt to EBITDA (incorporating the impact of the $1.5 billion buyback on ArcelorMittal’s debt at the end of Q2 2016) would improve by around 27% as compared to 2015.

MT Improvement in Indebtedness

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for ArcelorMittal

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Notes:
  1. ArcelorMittal Announces Offers to Purchase for Cash up to $1,500,000,000 Combined Aggregate Purchase Price of the Outstanding Notes Listed Below, ArcelorMittal News Release []