U.S. Steel is offering 50 million shares of common stock as it looks to raise capital to make it through the coronavirus public health crisis that has gutted much of the demand for steel.
The Pittsburgh-based steelmaker, one of Northwest Indiana's largest industrial employers and the founder of the city of Gary, is looking to raise $429 million through the public stock offering to "strengthen its balance sheet, increase liquidity and for general corporate purposes."
U.S. Steel also is giving underwriter Morgan Stanley & Co. a 30-day option to buy 7.5 million more shares of common stock. The Fortune 250 company's shares are publicly traded on the New York Stock Exchange under the symbol X.
The steelmaker expects to post a loss of $315 million in the second quarter, or $3.06 a share. It projects it will need $700 million in liquidity to make it through 2020, one of the most challenging years in recent memory.
“As expected, the second quarter is being significantly impacted by the effects of COVID-19 and the expected nonrecurring costs associated with a significant portion of our steelmaking operations being idled in the quarter. As we mentioned on our first quarter earnings call, we expect the second quarter to mark the trough for the year,” U. S. Steel President and CEODavidBurritt said.
“At the onset of the pandemic, we took swift and meaningful action in response to stay-at-home orders, original equipment manufacturer closures and reduced customer demand," he continued. "While the second quarter has been challenging, our optimism continues to grow as original equipment manufacturer restarts are progressing well and customer demand has started to return. Still, we are continuing to identify additional management actions and operating improvements to improve our cash usage through the end of the year.
"Protecting lives and livelihoods remains our top priority and by keeping our employees and communities safe and the business resilient, we can continue to meet our customers’ needs as we emerge from unprecedented market conditions.”
The company has been working to preserve cash by idling blast furnaces and temporarily laying off steelworkers. Its flat-rolled, European and tubular segments all have suffered because of the COVID-19 public health crisis.
U.S. Steel is still forging ahead with its long-term strategy of diversifying by adding a mini-mill to its portfolio, which includes Gary Works and the Midwest Plant in Portage, hoping for better days ahead.
“Our future is now, and we have taken significant actions this quarter to advance our ‘best of both’ integrated and mini-mill steel customer-focused technology strategy," Burritt said. "We are delivering on our commitment to extract incremental value from our iron ore assets, having entered into new agreements that deliver incremental earnings and cash to the balance sheet in 2020 and beyond. We continue to actively market our valuable portfolio of real estate assets and are evaluating strategic options for our UPI business and related property. Additionally, we have identified and completed actions that position us to achieve our $200 million fixed cost reduction target a year ahead of our original 2022 goal. Our successful senior secured notes offering in May also further enhanced our balance sheet and bolstered our liquidity. Big River Steel remains our number one strategic priority and we are confident that we are positioned to emerge from this crisis having made meaningful progress in the execution of our ‘best of both’ strategy.”