ArcelorMittal, the world’s largest steelmaker, has signed a share purchase agreement with DryLog for the sale of 50 per cent stake in Global Chartering (GCL), the steel major’s wholly-owned shipping business.
This is part of its commitment to unlock up to $2 billion from its asset portfolio by the middle of 2021. Subsequently, a 50:50 shipping joint venture will be formed with DryLog.
The asset divestment at the group level, announced by the company earlier this year, comes close on the heels of the conclusion of the $5.7 billion Essar Steel deal last week.
Essar Steel was acquired jointly by ArcelorMittal and Nippon Steel under the Insolvency and Bankruptcy Code (IBC). A joint venture (AM/NS India) in this regard exists between ArcelorMittal and Nippon Steel. ArcelorMittal holds 60 per cent in AM/NS India while the rest is with Nippon Steel.
The two companies are financing AM/NS India through a combination of one-third partnership equity and two-thirds debt. The debt will be held by the joint venture.
ArcelorMittal’s equity contribution, however, works out to around $1.14 billion, which is likely to be the net debt at the group level.
Arcelor’s net debt as of September 30, 2019, was $10.7 billion and it is committed to bringing it below $7 billion.
The stake sale and joint venture formation with DryLog will ultimately impact ArcelorMittal’s net debt by $530 million.
This figure will become $400 million on completion and a further $130 million due in early 2020, said the company in a statement. The DryLog transaction is expected to close before the end of 2019.
GCL currently operates 28 dry cargo vessels that range from Supramax to Cape Size, 25 of which are on long-term leases. These will be transferred to the joint venture, with the remaining three being owned outright.