United States Steel Corporation X stated that it plans to offer a total principal amount of $300 million senior convertible notes due 2026, subject to market conditions and other factors.
Per the company, the notes will be offered in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The company also intends to grant the initial buyers with a 30-day option to purchase up to an additional $50 million principal amount of the notes.
U.S. Steel plans to employ the net proceeds for general corporate purposes, which includes capital expenditures and earlier-announced strategic investments.
The notes will be treated as U.S. Steel’s general senior unsecured obligations. Per the company, they will be ranked equally in right of payment with all of its current and future senior debt. Also, the notes will be senior in right of payment to all of its future subordinated debt. They will mature on Nov 1, 2026, unless redeemed, converted or repurchased earlier.
Before Aug 1 2026, the notes will be convertible only at the option of the holder upon fulfilment of certain conditions and during certain periods. Upon conversion, the company will satisfy its conversion obligations by delivering or paying, cash, shares of its common stock or a combination of common shares and cash (as applicable) at U.S. Steel’s election.
Shares of U.S. Steel plunged 59.4% in the past year compared with the industry’s 31.7% decline.
Earlier this month, the company provided an updated guidance for third-quarter 2019. It now expects an adjusted loss in the band of 20-26 cents per share for the third quarter, narrower than the prior projection of adjusted loss of around 35 cents.
Moreover, U.S. Steel envisions adjusted EBITDA for the third quarter in the range of $134-$144 million, higher than its previous expectations of $115 million. The projected figure excludes nearly $9 million of estimated impacts from the fire at the company’s Clairton coke making facility in December 2018 as well as estimated restructuring charges of around $54 million.
The company attributed the improved outlook to better-than-expected manufacturing performance in its Flat-rolled division, stronger shipments and a contingency gain from recovered claims from the bankruptcy of a supplier.
It also sees preliminary total net sales in the range of $3,040-$3,075 million for the third quarter. The company is slated to report third-quarter results after the closing bell on Oct 31.
United States Steel Corporation Price and Consensus
United States Steel Corporation price-consensus-chart | United States Steel Corporation Quote
Zacks Rank & Key Picks
U.S. Steel currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the basic materials space are Kinross Gold Corporation KGC, Franco-Nevada Corporation FNV and Agnico Eagle Mines Limited AEM, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Kinross has an expected earnings growth rate of 170% for 2019. The company’s shares have surged 57.7% in the past year.
Franco-Nevada has a projected earnings growth rate of 34.9% for 2019. The company’s shares have rallied 39.6% in a year’s time.
Agnico Eagle has an estimated earnings growth rate of 158.6% for the current year. Its shares have moved up 40.9% in the past year.
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