Fitch Places Gerdau & Acominas on Rating Watch Negative Following Acquisition Announcement

Business Wire, July 11, 2007

CHICAGO -- Fitch Ratings has placed the following ratings of Gerdau S.A. (Gerdau) and related entities on Rating Watch Negative:

--Foreign currency Issuer Default Rating (IDR) 'BBB-';

--Local currency Issuer Default Rating (IDR) 'BBB-';

--National scale rating 'AA (bra)';

--US$600 million 8.875% guaranteed perpetual notes 'BBB-'.

Fitch has also placed on Rating Watch Negative the 'BBB-' local and foreign currency IDRs of Gerdau's Brazilian operating subsidiary, Acominas, and its national scale rating of 'AA (bra)'. Fitch has also placed on Rating Watch Negative the 'BBB-' local and foreign currency IDRs of Brazilian Steel Importer Ltd., and the following secured export note (SENs) issuances:

--Series 2003-A 'BBB';

--Series 2004-A 'BBB';

The placement of the ratings on Negative Watch follows the announcement by Gerdau Ameristeel Corporation that it has reached an agreement to acquire Chaparral Steel Company in a transaction that values the equity of Chaparral at $4.2 billion. Gerdau Ameristeel, whose controlling shareholder is Gerdau S.A, has stated that it intends to fund the acquisition with a mix of debt and equity. Positively, the transaction would strengthen Gerdau Ameristeel's business position in the competitive North American steel market.

The Negative Watch reflects the uncertainty of the ultimate financing structure that will be pursued by Gerdau Ameristeel. It also reflects concern that Gerdau S.A. may need to raise a material amount of debt, which would likely be guaranteed by its main Brazilian operating subsidiaries, to fund its portion of a future equity increase by Gerdau Ameristeel. At the end of 2006, Gerdau S.A. had $4.7 billion of total debt and $3.0 billion of cash and marketable securities. Gerdau's consolidated EBITDA for 2006 was $2.6 billion.

Headquartered in Porto Alegre, Brazil, Gerdau S.A. is a holding company for the group's steel production facilities in North and South America and Europe. The Gerdau companies operate minimill and integrated-steel facilities in Brazil, Argentina, Chile, Colombia, Peru, Uruguay, the United States, Canada, and Spain and have a crude steel production capacity of 19.2 million metric tons in 2006. Gerdau owns 89.3% of its Brazilian operating companies, which consist primarily of Acominas and Acos Longos and have a combined production capacity of about 9.3 million tons of crude steel. In North America, Gerdau owns 66.8% of Ameristeel, which ranks as the second-largest minimill steel producer with an annual manufacturing capacity of 9.0 million short tons of mill finished steel products from a network of 17 minimills, including the 50%-owned Gallatin Steel joint-venture.

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