Last updated: January 9, 2013 6:14 pm

ArcelorMittal to raise $3.5bn

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ArcelorMittal is poised to raise as much as $3.5bn through a joint share offering and convertible bond issue as part of an attempt to lighten its debt pile.

The deal comes hard on the heels of the steelmaker’s $1.1bn sale of a stake in its Canadian mine to a consortium of Asian steelmakers last week.

Details on how the fundraising with be split have yet to be announced as bankers negotiate pricing details.

The funds will go towards reducing ArcelorMittal’s bloated debt position.

Faced with a severe downturn in the steel industry, the company is attempting to lighten its debt load to $17bn by the end of June 2013. Its total net debt at the end of 2012 was about $22bn.

Lakshmi Mittal, chief executive, said: “Reducing net debt is a priority for the company.”

He added that the transaction would “significantly lower our net debt”.

The $3.5bn deal will be split between a stock offering and a mandatory convertible bond, which will pay a fixed income but convert into shares at an agreed price based on investor demand.

The company said the shares of common stock would be offered with preferential allocations to current shareholders.

The Mittal family – which owns 40.8 per cent of the company – have placed an order for $600m worth of shares.

The coupon for the convertible paper will be between 5.875 per cent and 6.375 per cent and will convert into shares in 2016, at a price of between 120 and 125 per cent of the equity placement price.

The placement price is expected to be somewhere in the region of the steelmaker’s current share price.

The group has American Depositary Receipts listed in New York, as well as listings in Amsterdam, Paris, Luxembourg and Spain.

The shares were trading down 2.5 per cent at €13.08 in Amsterdam, its primary listing, by the close of trade on Wednesday.

The fundraising marks the second time in less than two months that a European company has issued a mandatory convertible bond.

In November Volkswagen issued a €2.5bn mandatory convertible bond, the first in more than two years.

Several bankers have called the issuance “a game changer” because of the level of interest the highly technical instrument received from investors.

“[A] significant proportion [of VW’s convertible bond] was placed to outright, long only, onshore US convertible investors, delivering a truly incremental new source of aggressive equity capital for European corporates,” said Keyvan Zolfaghari, head of Emea and Asia-Pacific convertible bond origination at Deutsche Bank.

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