Moody's Investors Service has assigned a Ba2 rating to the proposed 30-year, $40 million Jefferson County Port Authority Economic Development Revenue Bonds.
The tax-exempt senior unsecured bonds will be guaranteed by JSW Steel Ltd. All other ratings on JSW are unaffected. The bond proceeds will be loaned to JSW Steel USA Ohio Inc (JSW Ohio), a step-down wholly owned subsidiary of JSW, and will be used to fund the upgrade of the US subsidiary's electric arc furnace (EAF). The loan terms are expected to mirror the proposed bond.
"The proposed bonds are backed by an unconditional, irrevocable corporate guarantee from JSW up to 125 per cent of the notes' face value, and rank pari passu with the company's existing senior unsecured debt," said Kaustubh Chaubal, a Moody's Vice President and Senior Credit Officer.
"As a result, they are rated at the same level as JSW's senior unsecured debt rating," he said.
"While the proposed bond is small compared with JSW's consolidated debt of $11 billion, but it has a long tenor and further diversifies its pool of investors," added Chaubal who is also Moody's lead analyst on JSW.
JSW Ohio owns a 1.5 million net tonnes per annum (mntpa) EAF and a 3 mntpa hot rolling mill. The EAF upgrade which was completed in March 2021 has led to a marked improvement in JSW Ohio's operations, illustrated by a $19 million EBITDA in the first quarter of fiscal year ending March 2022 (fiscal 2022).
This was the business' first positive EBITDA generation since its acquisition by JSW in fiscal 2019.
Looking ahead, Moody's said it expects the EAF upgrade and supportive industry fundamentals to aid JSW Ohio in sustaining positive EBITDA generation which will help the company service the interest on its loans.
More importantly, holders of the proposed bond will benefit from the JSW guarantee.
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