AK Steel Holding Corporation AKS has announced that its subsidiary, AK Steel Corporation has priced its public offering of $400 million aggregate principal amount of 7% senior notes due 2027. Interest on the notes will accrue from Mar 23, 2017 and the company will pay interest on them semi-annually. Additionally, the notes will be fully guaranteed by the parent company AK Holding, and by AK Tube LLC, AK Steel Properties, Inc. and Mountain State Carbon, LLC, all three fully-owned subsidiaries of AK Steel.
AK Steel plans to use the net proceeds along with cash in hand and/or borrowings under its revolving credit facility to finance the company’s previously announced cash tender offer for any and all of AK Steel's outstanding 7.625% senior notes due 2020.
Post the completion of the cash tender offer, outstanding old notes will be redeemed by the company. The offering is likely to close on Mar 23, 2017, subject to customary closing conditions. The joint book-running managers for the offering are BofA Merrill Lynch, Wells Fargo Securities, Citigroup, Goldman, Sachs & Co., BMO Capital Markets, Credit Suisse and Deutsche Bank Securities.
AK Steel outperformed the Zacks categorized Steel-Producers industry over a year. The company's shares rallied 95.2% during the period while the industry witnessed a gain of about 52%.
AK Steel remains committed to reduce cost amid a persistent challenging operating environment. The company remains on track with its cost cutting initiatives in 2017 through a number of means including process improvement, headcount cuts, reduction in process time and procurement activities.
AK Steel should also benefit from the strong momentum in the automotive market. The company is looking to continue to grow its core automotive business in 2017.
The company is also gaining from its acquisition of the Severstal Dearborn plant that is expected to boost its future earnings and improve its credit profile and liquidity. The buyout has provided the company an access to highly modernized and upgraded steelmaking equipment and facilities.
However, the company continues to face a challenging macroeconomic environment and weakness in the electrical steel market. It is also exposed to volatility in raw material and steel pricing.
AK Steel Holding Corporation Price and Consensus
AK Steel Holding Corporation Price and Consensus | AK Steel Holding Corporation Quote
AK Steel currently carries a Zacks Rank #3 (Hold).
Stocks to consider
Better-ranked companies in the steel space include POSCO PKX, Ternium S.A. TX and United States Steel Corp. X, all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
POSCO has an expected long-term growth of 5%.
Ternium has an expected long-term growth of 18.4%.
U.S. Steel has an expected long-term growth of 8%.
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