United States Steel Purchase Poses Risks to Nippon Steel's Credit Profile, S&P Says

The possible cancellation of Nippon Steel's (TYO:5401) acquisition of United States Steel could strain the Japanese steelmaker's operations, S&P Global Ratings said in a Tuesday release.

Nippon Steel would need to significantly reverse its purchase plans if the US government proceeds with the cancellation of the US steel company's buyout due to reported national security concerns, S&P said.

Extending the completion of the purchase to more than six months would markedly increase relevant resource needs, the rating agency said.

If Nippon Steel pursues the deal, Fitch sees the US company presenting potential volatility to the Japanese steelmaker's profitability and cash flow given the exposure to US steel price fluctuations.

Integration risk has also increased, with trade union United Steelworkers being against the deal.

S&P believes Nippon Steel would incur a large financial burden due to the deal, with an expected drop in its debt-to-EBITDA ratio to 3.5x if debt is used for financing.

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