AK Steel (AKS) Prices $380 Million Of Senior Secured Notes

AK Steel Holding Corporation’s (NYSE:AKS) subsidiary, AK Steel Corporation (AK Steel), has priced its public offering of $380 million aggregate principal amount of 7.50% senior secured notes due 2023. AK Steel will pay interest on the notes semi-annually on January 15 and July 15 of each year. Interest on the newly issued secured notes will be due from Jun 20, 2016.

The secured notes will be fully and unconditionally guaranteed by AK Holding, AK Steel's direct parent, and by AK Tube LLC and AK Steel Properties, Inc., two fully-owned units of AK Steel.

AK Steel plans to utilize the net proceeds of the notes offering, along with cash on hand and/or borrowings under its revolving credit facility, to fund its earlier announced cash tender offer for any and all of its outstanding 8.750% Senior Secured Notes due 2018. The offering is expected to close on Jun 20, 2016, subject to customary closing conditions.

AK Steel exited first quarter 2016 with cash and cash equivalents of $113 million, up roughly 99.7% year over year. Changes in working capital prompted an increase in cash flows from operating activities, helping the company add $56.4 million to its cash balance in the quarter. Long-term debt remained relatively consistent year over year, at $2,336.4 million.

AK Steel remains affected by global overcapacity in steel and cheap products from China. However, the company aims to provide competitive pricing even in the current economic environment. Price increases in the spot market for various steel products have been observed of late.

Momentum in the company’s main consumer market, the auto sector, continues as the industry experts expect light vehicle production to increase 3% in 2016 from the 2015 level. This is expected to support demand for its value-added products in this key market. The company has also developed a unique product in partnership with NanoSteel Company, with high future potential.

AK Steel currently has a Zacks Rank #3 (Hold).

Some better-ranked companies in the steel space include Ryerson Holding Corp. (NYSE:RYI) , ArcelorMittal (NYSE:MT) and POSCO (NYSE:PKX) . While Ryerson Holding and POSCO sport a Zacks Rank #1 (Strong Buy), ArcelorMittal carries a Zacks Rank #2 (Buy).