CSN: S&P Downgrade Reinforces Execution Risk, Thesis Persists

S&P treats asset sales as neutral until realized, while we see the plan as directionally credit positive despite a clear show-me execution risk.

Following our recent note on CSN’s announced divestment strategy, S&P Global Ratings downgraded the company to B+ with a Negative outlook, citing uncertainty around the execution, timing, and cash flow impact of the planned asset sales. While we agree that execution risk remains central to the credit story, we think the downgrade also highlights a broader tension between rating agency methodology and the directional improvement implied by a deleveraging plan of this magnitude.

S&P’s rationale is anchored in the conditional nature of CSN’s leverage reduction. The agency assumes that, absent completed divestments, leverage remains above 5.0x through 2026 and therefore treats the announced R$16–18bn asset sale program as largely neutral until proceeds are realized. From a methodological standpoint, this approach may be internally consistent, but it is inherently backward looking at a moment of strategic inflection. From a bondholder perspective, however, it arguably underweights the more relevant question, which is whether the plan improves the probability of deleveraging within a timeframe that matters for creditors, even if the path remains execution dependent.