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Fitch Rates Port Auth of the City of St Paul (MN) Solid Waste Disposal Revs (Gerdau) 2012-7 'BBB-'

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has assigned a 'BBB-' rating to the USD51 million solid waste disposal revenue bonds series 2012-7 issued by the Port Authority of the City of Saint Paul, Minnesota on behalf of Gerdau Ameristeel US Inc. (Gerdau Ameristeel).

This tax exempt bond is fully and unconditionally guaranteed by Gerdau S.A. (Gerdau) of Brazil to meet all principal and interest. Proceeds of the bonds will be lent to Gerdau Ameristeel, a wholly owned subsidiary of Gerdau, for the explicit purpose of its solid waste disposal facility project at the company's facility in St Paul, Minnesota. The project includes the acquisition and installation of a solid waste disposal facility for the formation of liquid steel into billet form, in addition to the construction of the building in which it will be located.

The ratings of the USD51 million revenue bonds reflect the strength of Gerdau's credit profile as a result of its unconditional guarantee. Gerdau's 'BBB-' investment-grade ratings are supported by its commitment to a conservative capital structure, as demonstrated by its public stock offering in April 2011 and historically robust liquidity. The stability in Gerdau's credit metrics can be seen in the company's five-year rolling average funds from operations (FFO) adjusted leverage ratio of 3.1x, which compares well to its regional peers in its rating category, and its five-year rolling average net debt-to-EBITDA ratio of 2.1x.

Gerdau has low refinancing risk with a debt average life of five years as of June 30, 2012. The company's cash-to-short-term debt ratio stood at 1.1x, and its cash plus cash flow from operations (CFFO) to short-term debt ratio was 2.5x for the period.

Additional information is available at www.fitchratings.com. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 8, 2012);

--'National Ratings - Methodology Update' (Jan. 19, 2011);

--'Evaluating Corporate Governance' (Dec. 13, 2011);

--'Parent and Subsidiary Rating Linkage' (Aug. 8, 2012).

Applicable Criteria and Related Research:

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460

National Ratings Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595885

Evaluating Corporate Governance

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=657143

Parent and Subsidiary Rating Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685552

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Fitch Ratings
Primary Analyst
Jay Djemal, +1 312-368-3134
Director
Fitch, Inc.
70 West Madison Street
Chicago, IL 60602
or
Secondary Analyst
Joe Bormann, CFA, +1 312-368-3349
Managing Director
or
Tertiary Analyst
Ricardo Carvalho, +55-21-4503-2600
Senior Director
or
Committee Chairperson
Daniel Kastholm, CFA, +1 312-368-2070
Managing Director
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Media Relations:
Elizabeth Fogerty, +1 212-908-0526
Email: elizabeth.fogerty@fitchratings.com

Source: Fitch Ratings