| SAO PAULO
SAO PAULO Jan 13 Brazilian steelmaker Usinas
Siderúrgicas de Minas Gerais SA's plan to tap excess cash from a
mining subsidiary that was rejected this week was found not to
pose any potential financial risk for the unit, a person briefed
on the matter said.
In recent months, Usiminas sought tapping excess
cash at the Musa Mineração Usiminas SA through a capital
reduction, to comply with terms of a 6 billion-real debt
refinancing accord with banks. The initiative was rejected
earlier this week by Musa shareholder Sumitomo Corp.
According to the person, executives at Musa ran simulations
under which the 1 billion-real ($315 million) capital reduction
would take place, with none of them pointing to any cash strain.
The simulations were run late last year at the behest of
Sumitomo, the person said. Musa offered to formally present
results to the management and board of Usiminas so they were
aware of the implications of the plan ahead of the Jan. 10 vote,
the person said.
Sumitomo vetoed the plan that day, claiming it could put at
risk Musa's financial position for the years to come. Belo
Horizonte, Brazil-based Usiminas declined to comment, as did
Musa and Sumitomo. The person requested anonymity due to the
sensitivity of the issue.
Usiminas has vowed to legally challenge the veto through any
"valid legal means." The veto bars the debt-laden steelmaker
from tapping cash from Musa, in which Sumitomo has a 30 percent
stake. Analysts have said that Musa is not in urgent need to
deploy cash because it is not currently undertaking significant
The situation is another chapter in a 2 1/2-year rift
between the steelmaker's two top shareholders - Nippon Steel &
Sumitomo Metal Corp and Techint Group's Ternium SA
. Ternium and Nippon Steel have been battling over control
of Usiminas, which is suffering with Brazil's worst recession
ever and high debt.
This week, Ternium called on Usiminas Chief Executive
Officer Rômel de Souza to accelerate the tapping of Musa's cash
before the debt refinancing accord's June 2017 deadline.
This week, Reuters reported, citing documents, that Souza
and Musa President Wilfred Brujin had unilaterally agreed to the
use of Musa's excess capital without the acquiescence of
Usiminas' board. Souza is also the chairman of Musa.
The document from November showed that two Nippon
Steel-appointed members of the Usiminas board suggested Musa
could extend a loan to Usiminas to meet the refinancing deadline
of June 2017.
The executives declined to comment on the content of the
document, as did Nippon Steel.
($1 = 3.1830 reais)
(Editing by Bernard Orr)