# Fitch cuts CSN on leverage strain, flags negative watch amid asset-sale gamble

*Downgrade reflects persistent leverage above peers, negative free cash flow and refinancing risks as the Brazilian steelmaker races to sell assets to shore up capital structure.*

- Published: 2026-02-02
- Section: Insights
- Tags: asset sales, Brazil steel, Credit Rating, CSN, deleveraging, Fitch Ratings, leverage, mining, negative watch, steel imports
- URL: https://brazilstockguide.com/insights/fitch-cuts-csn-rating-negative-watch/

**By Brazil Stock Guide –** Companhia Siderúrgica Nacional (**B3: CSN3)** had its long-term issuer default ratings cut by Fitch Ratings to **‘BB-’** from **‘BB’**, with the national scale rating lowered to **‘AA-(bra)’** from **‘AAA(bra)’**, and all ratings placed on **Negative Watch**. The move underscores the agency’s concern with CSN’s **persistently high leverage**, **recurring negative free cash flow** and **elevated refinancing risks** at the holding level, while removing a prior methodological observation.

Fitch said gross and net leverage remain the key constraints on the credit profile. The agency now projects **gross leverage/EBITDA of 5.9x in 2025 and 5.7x in 2026**, versus **6.7x in 2024**, with **net leverage at 4.4x and 4.6x**, respectively. Interest coverage sits in **‘CCC’ territory** (around **1.25x EBITDA**), reflecting heavy interest expense. Excluding mining, leverage spikes sharply, with **gross and net leverage of 15.5x and 13.7x** projected for 2025, highlighting the **holding’s refinancing vulnerability** amid about **R$48 billion** of debt.

The **Negative Watch** hinges on execution risk around a **delevarage plan** anchored in asset sales. Fitch’s base case **does not assume proceeds**, but CSN aims to sell a **majority stake in cement** and a **significant minority in infrastructure**, targeting **R$15–18 billion** in cash, with contracts expected in **2H26**. In a hypothetical sale of **60% of cement and 49% of infrastructure**, Fitch estimates **R$15.6 billion** raised—about **27% of total debt**—cutting pro-forma gross and net debt to roughly **R$40 billion** and **R$14.5 billion**. The group already monetized its stake in **MRS Logística** in December 2025, generating **R$3.35 billion** for the holding.

Governance weighs on the outcome. Fitch said clearer evidence of shareholder commitment to a stronger credit profile is essential under its updated governance methodology, which can impose a **one-notch discount** for key-person risk, risk appetite, complexity and contagion. CSN’s governance is assessed as **“Good”**, acknowledging **high debt-service priority**, but the agency flagged the importance of **credible debt reduction**.

Operationally, Fitch expects **mining to cushion earnings** despite softer iron ore prices, with volume growth and cost gains offsetting weaker demand from China and rising African supply. Projects at **Pires** and **B4** should add about **3.5 mt** after 2025, while **Itabirito P15** contributes **>16 mt from late-2027**. In steel, however, the market remains challenging: imports—**61% from China**—lifted import penetration in flat steel to **24.9%** in 9M25 from **20.8%** in 2024, pressuring prices despite better cost control that raised EBITDA/ton to about **US$83** for 2025.

**What could move the rating**
A further downgrade could follow if **asset sales stall**, **liquidity tightens**, **gross debt fails to decline**, or leverage stays **above 5.0x gross / 4.0x net**, especially alongside debt-funded acquisitions or higher dividend pressure. An upgrade is **off the table** until there is **clear execution** on disposals and deleveraging.

**Liquidity snapshot**
At **30 Sep 2025**, CSN had **R$52.2 billion** in reported debt (**R$57.3 billion adjusted** including advances and forfaiting), **R$16.5 billion** in cash, and **R$6.29 billion** pro-forma cash at the holding after transfers. Average maturities imply about **R$9.0 billion** coming due annually between **2026–28**, with a **R$10.7 billion** peak in **2028**, keeping market access critical.

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Source: Brazil Stock Guide, https://brazilstockguide.com/insights/fitch-cuts-csn-rating-negative-watch/