Fitch Upgrades United States Steel Corp's Senior Unsecured Notes to 'BB'; Senior Secured Bank Loan to 'BB+'

Business Wire, April 7, 2005

NEW YORK -- Fitch Ratings has raised the ratings of United States Steel Corporation (U.S. Steel) securities as follows:

--$378 million senior notes due 2010 to 'BB' from 'BB-';

--$348 million senior notes due 2008 to 'BB' from 'BB-';

--$600 million senior secured revolving credit facility to 'BB+' from 'BB';

--Series B Mandatory Convertible Preferred Shares ratings to 'B+' from 'B'.

The Rating Outlook for U.S. Steel is Stable.

The upgrade reflects permanent improvements to U.S. Steel's assets and capital structure afforded by extraordinarily robust market conditions. The steel market should remain relatively balanced over the short term.

U.S. Steel's performance for 2004 has exceeded expectations on resilient domestic pricing and good S,G&A cost control. The outlook for domestic steel pricing is supported by tight raw materials supply, which constrains production, as well as high transportation costs and the weak U.S. dollar -- both of which discourage imports. Fiscal 2004 EBITDA was nearly $2 billion, covering interest expense by 9.7 times (x).

The company has used this windfall to strengthen its balance sheet: U.S. Steel voluntarily contributed $295 million to its pension fund and $30 million to a Voluntary Employee Benefit Association trust in 2004. In addition, the company raised $294 million from the sale of common stock in March 2004 and redeemed $259 million of high coupon debt with the proceeds in April 2004, and prepaid the $272 million U.S. Steel Kosice loan in November 2004. Liquidity is very strong with cash on hand of $1 billion and availability under facilities of $1.1 billion. In 2005, we expect U.S. Steel to generate excess cash after $755 million in capital expenditures, $54.5 million in dividends, and $8 million in scheduled debt retirements.

Only $57 million of U.S. Steel's debt is callable. We expect the company continue to shore up its operations while the steel price environment is strong and to build cash. The company's acquisition activity during this period of consolidation has been measured and focused domestically and in Eastern Europe. In the near term, we expect leverage as measured by EBITDA-to-total debt to remain in the 1x range.

U.S. Steel is the second largest integrated producer of steel in the United States and has a worldwide raw steel capability of nearly 27 million tons per year. The company produces a wide variety of steel products, is a leading supplier of carbon sheet to the automotive and appliance industries, and is the second largest tin mill product producer in North America. U.S. Steel is the largest domestic producer of seamless oil country tubular goods used in oil/gas drilling.