BlueScope to Raise A$1.4 Billion From Stock Sale to Cut Debt

By Rebecca Keenan

May 5 (Bloomberg) -- BlueScope Steel Ltd. plans to raise as much as A$1.4 billion ($1 billion) from its second share sale in three months as the slump in metals demand drives Australia’s largest steelmaker to a half-year loss.

The company is offering stock to existing holders at A$1.55 each, 40 percent less than the last traded price, Melbourne- based BlueScope Steel said today in a statement. The steelmaker has also arranged a A$1.3 billion syndicated loan.

Chief Executive Officer Paul O’Malley said BlueScope Steel won’t pay a dividend this half as export markets remain “challenging.” Steel producers from Europe’s ArcelorMittal to Australia’s OneSteel Ltd. have taken advantage of a global stocks rally to sell shares this year, strengthening finances as they cut output and conserve cash to cope with the recession.

“There is plenty of money around and they are taking advantage of that,” Andrew Sekely, head of Australian equities at Intersuisse Ltd., said in Sydney. “‘It is a bit of surprise because they raised capital not so long ago.”

BlueScope Steel, suspended from trading for the announcement, has dropped 27 percent this year on the Australian stock exchange to A$2.57 yesterday. The benchmark index has gained 4.7 percent this year, and jumped 24 percent since March 6, bolstering attempts by companies to raise cash.

BlueScope Steel, which raised a total of A$413 million in two offerings in December and February, said it will use the money from today’s announced stock sale and loans to refinance A$2.1 billion of existing debt. The share sale has been underwritten to A$825 million by Credit Suisse Group AG.

The stock will resume trading on May 7.

Stronger Balance Sheet

“With a stronger balance sheet and the extension of all our material loan maturities for at least two years, we are well positioned for current market conditions,” O’Malley said in the statement. Steel prices are now lower than they were in the December half, the company said.

BlueScope Steel today also said it may delay restarting the blast furnace at Port Kembla after a major reline is completed in June.

The company last week said there are signs that steel destocking cycles in China and the U.S., which have cut demand for the raw material, are ending.

Steel demand will stabilize in the “latter part” of 2009, leading to a mild recovery in 2010, the World Steel Association said last month. China, the world’s biggest steel consumer, is spending 4 trillion yuan ($586 million) to spur domestic demand.

To contact the reporter on this story: Rebecca Keenan in Melbourne at rkeenan5@bloomberg.net