The Mittal family has let their ownership of Arcelor Mittal, the world’s largest steel maker by far, slip as they raise $3b in a surprise cash call according to the Telegraph newspaper. Arcelor has been burning cash in the first quarter as capacity utilization has slipped under 50% while the firm posted a net loss of $1.1b in the first quarter. As the company has tried to cope with falling sales prices and write down on inventory approaching a billion dollars, it has struggled to reduce its $26b mountain of debt, further diluting earnings. The cash will be in the form of $2.5b of common stock and a $500m convertible bond. Interestingly demand for the new shares was so strong the paper reports it was sold out within 90 minutes on Wednesday and it’s possible further shares may be offered to raise the offering to $3.5b. The Mittal family subscribed to just 10% of the new offering allowing their stake in the company to slip from the current 45% to somewhere nearer 40%.
Global steel demand is forecast to fall by nearly 15% this year according to the World Steel Association but investors clearly see Arcelor Mittal as being better positioned than many to take advantage of an improvement in the market when it comes. Let’s hope this is all Mittal needs to see it through the crisis, after raising $1.2b by way of a convertible in March there must be a limit to the market’s enthusiasm for the company’s stock.