The bank debt for Ispat Inland has popped in the last couple of weeks, trading into the 77-79 context. Traders said the name was quoted in the 72-74 range in early November. Strong steel prices, the company's low leverage, and a "great parent company" were some of the factors supporting the credit, according to traders. Another potential factor that may have contributed to the rise in the price of the bank debt is the completion of a upgrade to the company's No. 7 blast furnace that investors may have perceived as a risk, speculated Tom McCue, treasurer of Ispat Inland. "Our whole operation is going to be stronger because of it," he said, noting that the furnace could produce more than 10,000 tons of iron up from 7,000 tons.
The furnace reline took 80 days and cost Ispat Inland about $100 million. The facility provides about two-thirds of the iron for the company's steelmaking and finishing operations in Indiana. Ispat Inland's parent company, Ispat International, recently released its third quarter results, which referred to results under the Ispat Inland segment. Although these results were weaker than the same quarter last year, McCue said there was a heavy negative to the quarter because of the reline. He speculated that investors are treating that furnace reline as a one-off situation that is now in the past.
Separately, it is unclear how the World Trade Organizations' recent ruling against U.S. steel duties would ultimately affect the company. "It's a wild card," said McCue. There are some trends in the steel industry that would serve as barriers of protections against cheap imports coming into the U.S. market, he explained, noting that the strength of the Asian steel markets, rocketing freight rates, and the current exchange rates could provide barriers. The company has about $650 million in bank debt led by Credit Suisse First Boston.