Fitch Ratings Affirms Tenaris' IDR at 'A-'

Business Wire, Oct 31, 2008

CHICAGO -- Fitch Ratings has affirmed the 'A-' Issuer Default Rating (IDR) of Tenaris S.A. (Tenaris). The Rating Outlook is Stable. Tenaris, a Luxembourg-based holding company, is a leading supplier of steel pipes products and related services for the global energy industry with operations throughout the world.

The rating reflects Tenaris' solid business position within the industry, its solid financial profile and the strong cash flow which allows the company to service its debt. Tenaris' production facilities, sales and EBITDA are geographically diversified, reducing the company's exposure to single markets. North America and Europe are the company's largest markets, accounting for more than 50% of its sales. South American accounts for about 24% of the company's sales, while the Middle East and Africa represent 18% of sales.

Tenaris is exposed to the cyclicality of the oil and gas industry, as its cash generation is indirectly affected by world oil prices. Tenaris' demand and prices could suffer from a downward trend in oil price as its main commercial counterparties reduce their capital expenditure programs. Tenaris maintains a conservative financial profile, allowing it to weather cyclical downturns.

Tenaris' financial debt reached US$4 billion as of Dec. 31, 2007, following the acquisitions of Maverick Tube Corporation and Hydril Company during 2006 and 2007. Through these acquisitions Tenaris significantly increased its presence in North America market. Currently, the United States market represents 33% of the apparent demand of OCTG products. During the last 12 months as of June 2008, Tenaris generated US$3.5 billion of EBITDA and US$2 billion of cash flow from operations. The strong cash generation was supported by a sustain demand for tubes, higher average prices and an increase in volumes as a result of its acquisitions. Tenaris used strong cash flow generation during the first half of 2008 to reduce its debt to US$3.1 billion as of June 30, 2008. Due to strong cash generation, plus the sale of Hydril's pressure control business, Tenaris increased its cash position to US$ 1.69 billion. For 2009 and 2010, the company has to pay installments of US$920 million and US$ 631 million, respectively. Tenaris is in a good position to repay most of this debt with a mix of cash flow from operations and cash and marketable securities available.

Most of Tenaris' debt consists of syndicated bank loans at its operating subsidiaries. There are no cross guarantees betweens these loans. The debt at the holding company level has been reduced to US$250 million as of today from US$1 billion as of Dec. 31, 2007. Tenaris has the option to extend the maturity of this debt from May 2009 until May 2012. During the last 12 months as of June 2008, Tenaris received US$1.6 billion from its global subsidiaries, allowing it to easily meet debt service requirements.

Approximately 15% of Tenaris' long-term debt was held at its Argentine operating subsidiary, Siderca. Fitch believes the transfer and convertibility risks associated with repaying Siderca's dollar-denominated debt is manageable because of Siderca's history of debt repayment during the recent crisis and its revenue diversification, with exports representing more than 70% of total sales. On a standalone basis, however, Siderca's debt would not be rated at the same level as Tenaris.

Tenaris used derivatives instruments to hedge its operations in different currencies and certain interest rate hedges. Fitch has assessed the impact of these derivatives, and no negative impact is expected from these instruments, as the hedges are designed so that Tenaris will benefit from a strengthening of the U.S. dollar. The derivative contracts do not have margin calls.

Tenaris is a leading global supplier of steel tubes and related services for the global energy industry as well as for other industrial applications. It operates a worldwide network of companies with manufacturing facilities in 15 countries and service and distribution centers in more than 25 countries. Tenaris' production capacity has reached 6.1 million tons. About 60.4% of Tenaris is held by the Techint Group. Techint operates worldwide in the steel, energy, engineering and construction sectors. Tenaris was incorporated in Luxembourg in 2001 to hold the group's steel tube manufacturing and distribution business. The rest of its shares are listed on the Buenos Aires, Mexico, Italy and New York stock exchanges since December 2002.

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