Stelco shares tumble after scrapping debt offering

Shares of Stelco Holdings Inc. fell more than 11 per cent on Tuesday after the Canadian steel company withdrew its Us$300-million debt offering, citing “current bond market conditions.”

The firm said last week it planned to offer senior secured notes due 2024 to raise money for capital expenditures and corporate purposes, including potential acquisitions or other deals.

Stelco shares ended the day at $ 9.43, down 11.7 per cent in Toronto.

Stelco’s withdrawal comes at a time industry experts are predicting continued weakness in steel prices.

United States Steel Corp. warned of weakening demand last week and forecast a bigger- than- expected loss for the third quarter.

People are having a hard time getting comfortable with steel names in general and a poor guidance from U.S. Steel didn’t help with investor sentiment, said Dhruv Mallick at Leith Wheeler Investment Counsel Ltd.

Stelco’s planned offering was rated as junk by ratings agencies Moody’s and S& P Global Platts. Moody’s cited expected cash flow volatility at the firm amid sharp movements in steel prices among constraints to its rating.

The company could not immediately be reached for comment about how it plans to raise funds after scrapping the offering.

Last week, coal miner Peabody Energy Corp. scrapped its planned offerings of US$1 billion in senior secured notes, saying it did not see an economic way of completing the offers in current debt market conditions.