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AK Steel Corporation (AK Steel), a subsidiary of AK Steel Holding Corporation (AKS - Analyst Report), has completed exchange offering of up to $380 million in aggregate principal amount of its 8.75% senior secured notes due 2018 for an equal aggregate principal amount of its registered 8.75% senior secured notes due 2018 (the New Notes).

The initial notes were not registered under the Securities Act of 1933, as amended.  The exchange offer of the initial notes expired on Aug 28, 2013.

All of the initial notes were submitted for exchange offering. AK Steel accepted the notes validly tendered for exchange and not withdrawn following the exchange offer
 
The new notes that are to be exchanged for the initial notes hold substantially similar terms as that of the initial notes apart from the clauses that new notes are registered under the Securities Act of 1933, as amended, have no transfer restrictions under the federal securities laws, no registration rights and no rights to additional interest.

The exchange offer was made following the Registration Rights Agreements entered by AK Steel and AK Holding at the time of the issuance of the initial notes on Nov 20, 2012, and Jun 24, 2013. The objective of the offer was to enable initial notes holders to exchange their initial notes for new notes that are not subject to restrictions. However, AK Steel did not get any proceeds from the offer.

AK Steel posted narrower loss in second-quarter 2013. The company recorded a net loss of $40.4 million or 30 cents a share in the quarter, down roughly 94% from a loss of $724.2 million or $6.55 a share a year-ago. Barring one-time items (tax charges related to a valuation allowance for deferred tax assets), AK Steel’s loss for the quarter was 15 cents per share, narrower than the Zacks Consensus Estimate of a loss of 35 cents.

Revenues fell 8.7% year over year to $1,404.5 million in the reported quarter due to lower shipments to carbon spot and electrical steel markets. It missed the Zacks Consensus Estimate of $1,414 million.

AK Steel is expected to benefit from the strength in the automotive market and higher shipment of carbon steel products to automakers. The company is also investing to internally procure about half of its iron ore and coal requirements.

However, we remain concerned about the challenging operating backdrop in overseas markets, softness in the construction market and the weak steel pricing environment. Moreover, maintenance outage associated with the Ohio blast furnace will weigh on its third quarter results.  

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

Other companies in the steel industry with favorable Zacks Rank are Nippon Steel & Sumitomo Metal Corp. , Kobe Steel Ltd. and Ternium S.A. (TX - Snapshot Report). While Nippon Steel retains a Zacks Rank #1 (Strong Buy), both Kobe Steel and Ternium carry a Zacks Rank #2 (Buy).

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