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Reliance Steel (RS) Declares New $2.1 Billion Credit Deal

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Reliance Steel (RS - Free Report) said that it has entered into a new credit deal consisting of a $1.5 billion unsecured revolving credit facility and a $600 million unsecured term loan. The new deal replaces the company's current credit agreement and has a term of five years. Both facilities under the new agreement allow for prepayments.

The credit deal includes an option to increase the revolving credit facility for up to an additional $500 million. The terms of the agreement are largely consistent with the existing credit agreement.

Reliance Steel plans to utilize the proceeds from the revolving credit facility to pay off $350 million of 6.2% senior unsecured notes when they mature on Nov 15, 2016. This will provide significant interest expense savings, the company noted. The new deal also offers adequate liquidity to support the company’s ongoing growth initiatives.

Reliance Steel’s shares closed 1.9% lower at $70.64 on Oct 3.

While Reliance Steel is seeing strong demand for its products across aerospace and automotive markets and should gain from its strategic acquisitions, it remains exposed to pricing pressure. Despite an improvement in metals prices of late, overall pricing remains below peaks levels as well as the levels seen last year.

The company’s business in the energy markets is also expected to remain under pressure in the near term due to depressed oil prices. Reduced drilling activities are hurting demand for the company’s products in the energy space.

Reliance Steel is a Zacks Rank #4 (Sell) stock.

Stocks to Consider
Some better-ranked companies in the basic materials space include Mitsui & Co. Ltd. , AngloGold Ashanti Ltd. (AU - Free Report) and Southern Copper Corp. (SCCO - Free Report) .

Mitsui sports a Zacks Rank #1 (Strong Buy). The company has an expected earnings growth of around 408% for the current year. You can see the complete list of today’s Zacks #1 Rank stocks here.

AngloGold Ashanti has an expected earnings growth of 368% for the current year. The stock carries a Zacks Rank #1.

Southern Copper, currently holding a Zacks Rank #2 (Buy), has an expected earnings growth of roughly 14.70% for the current year.

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