U.S. Steel to sell $300 million of notes

Blast furnaces at U.S. Steel Gary Works in Gary.

U.S. Steel plans to sell $300 million worth of senior convertible notes after acquiring a major stake in Big River Steel in northeast Arkansas.

The Pittsburgh-based steelmaker, one of Northwest Indiana's largest employers, is making a private offering to institutional investors of debt securities that will mature on Nov. 1, 2026, and rank equally in right of payment with its senior debt. The company will then pay out noteholders with U.S. Steel stock, cash or a combination of both.

U.S. Steel reported at its second-quarter earnings that its long-term debt already stood at more than $2.3 billion.

"U.S. Steel intends to use the net proceeds from the offerings for general corporate purposes, including, without limitation, for previously announced strategic investments and capital expenditures," the company said in a news release.

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U.S. Steel previously announced it acquired a 49.9% interest in the $2.325 billion Big River Steel mini mill in northeast Arkansas for $700 million, which it committed financing to itself. It also got an option to buy the remaining 50.1% of the "newest and most advanced flat-rolled mill in North America" at a market-dictated price within four years.

It's one of the largest flat-rolled mills in the United States to use electric arc furnaces, which turn scrap metal into steel, and is currently undergoing an expansion that will boost its production capacity from 1.6 million tons a year to 3.3 million tons a year.

Long an integrated steelmaker, U.S. Steel is looking to diversify its portfolio to include electric arc furnaces that have come to dominate the American steel industry in recent decades because of their lower operating costs. Big River Steel will complement U.S. Steel's Gary Works and Mon Valley Works operations, making a variety of steel products for the automotive, energy, construction and agricultural industries.

U.S. Steel has been struggling with market conditions and low prices, idling Blast Furnace No. 8 at Gary Works and East Chicago Tin. The steelmaker's stock price has been depressed at around $10 a share and its market capitalization now stands at about $1.9 billion or more than 75% less than its market capitalization of $8 billion last February.


Business Reporter

Joseph S. Pete is a Lisagor Award-winning business reporter who covers steel, industry, unions, the ports, retail, banking and more. The Indiana University grad has been with The Times since 2013 and blogs about craft beer, culture and the military.