Fitch Places National Steel's Notes on Rating Watch Negative

Business Wire, Nov 22, 2006

CHICAGO -- Fitch Ratings has placed the 'BB' foreign currency rating of National Steel S.A.'s (National Steel) US$450 million 9.875% perpetual notes on Rating Watch Negative.

This rating action reflects the proposed plans by Companhia Siderurgica Nacional (CSN) to acquire the Corus Group Plc (Corus), a European steel producer for approximately US$8 billion (475 pence per ordinary share). CSN's offer follows an earlier proposal made by India-based Tata Steel Limited (Tata Steel) to acquire Corus for 455 pence per share.

National Steel is a holding company that is 100% indirectly controlled by Brazil's Steinbruch family. National Steel's sole asset consists of 100% of the redeemable preferred shares of Acos. Acos, in turn, is a holding company that owns 100% of Vicunha. Vicunha is also a holding company that owns 42.74% of the common shares and controlling interest in Brazilian steel producer CSN.

The 'BB' rating of National Steel's perpetual notes reflects the financial strength of CSN, Vicunha's sole operating subsidiary, and the expectation that CSN's future free cash flow available for dividends will be sufficient to allow National Steel to service its debt obligations.

Dividend payments by CSN of approximately US$120 million per year should allow National Steel to meet expected annual debt-service obligations of about US$50 million. CSN's dividend payments in 2005 of US$961 million were above average. In 2004 and in 2003, CSN distributed dividends totaling US$242 million and US$278 million, respectively. National Steel's obligations are structurally subordinated to those of CSN, as its only source of income consists of the dividends received indirectly from CSN. Thus, the rating of National Steel's perpetual notes is linked to CSN's 'BBB-', Rating Watch Negative local currency Issuer Default Rating.

The Negative Rating Watch of CSN's local currency rating reflects concern that if CSN is successful in its attempt to buy Corus a material amount of the transaction would be funded with CSN's cash and proceeds from additional debt. It also incorporates an expectation that CSN could raise the price it is willing to pay for Corus if Tata or another steel company makes another counteroffer.

Fitch Rates CSN and related entities as follows:

--Foreign currency and local currency Issuer Default Ratings (IDRs) 'BBB-';

--Unsecured debt obligations issued by CSN Islands entities 'BBB-';

--National scale rating and local debentures issuances 'AA(bra)';

CSN Export Trust

--Series 2003-1 'BBB';

--Series 2004-1 'BBB';

--Series 2005-1 'BBB'.

These ratings were placed on Rating Watch Negative on Nov. 17, 2006.

Fitch rates Corus 'BB-' (currently on Rating Watch Negative) due to a financing structure proposed by Tata that would burden Corus with much of the acquisition debt. CSN is also expected to attempt to fund much of its proposed offer for Corus with non-recourse debt that would increase leverage at Corus.

CSN and Corus together would rank among the largest global steel producers with annual steel production of 24 million tons. In addition, CSN expects to produce 50 million tons of iron ore annually by 2010.

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