S&P Global Ratings Is ‘Blind’: Cleveland-Cliffs CEO Berates Analysts Yet Again

(Bloomberg) -- The sun rises in the east, and the CEO of steel producer Cleveland-Cliffs Inc. publicly complains about financial analysts. These are things you can bank on.

The target of Lourenco Goncalves's scorn Thursday was S&P Global Ratings, whose view of his company's creditworthiness is lower than rivals Moody's Investors Service and Fitch Ratings.

“S&P is just horrible,” Goncalves said on a quarterly earnings conference call in response to an analyst who asked about the difference. “They are blind, and they don't get it.”

It's not the first time Goncalves has berated analysts who cover his company. “It's unbelievable that these big banks still employ these type of people,” he said during a 2018 conference call. “You are a disaster. You are an embarrassment to your parents.”

He specifically called out Goldman Sachs Group Inc.'s Matthew Korn for saying the company missed earnings estimates. “Matthew Korn from Goldman Sachs, you can run, but you can't hide.”

Read More: ‘You Can Run But You Can't Hide,' CEO Tells Goldman Analyst

In 2014, he refused to answer a question from a Wells Fargo & Co. analyst “because you already knew everything about my company.”

Cleveland-Cliffs sold $1 billion of unsecured bonds in February. Fitch rated them five steps below investment grade, while Moody's was one notch lower. S&P grades other unsecured debt from the company at CCC, two rungs below Moody's. Goncalves said he opted not to use S&P's rating on the latest deal.

“I'm not saying that Moody's and Fitch are much better,” he said.

Despite the lower rating, it's not all bad news from S&P, which boosted its credit outlook on Cleveland-Cliffs to positive from negative last month. Analysts Vania Dimova and Allison Schroeder did, however, flag concerns over the company's high debt balance and pension obligations, and the threat that imports could cut into earnings.

A representative for S&P deferred to the analysts' March 15 report when asked for comment.

Bank of America Corp. analyst Matthew Fields got the discussion going Thursday. Goncalves asked him a follow-up question, wondering when high-yield investors will let him do a bond sale without a rating, “because you guys all know that these folks don't know anything.”

“I think the high-yield investors are sometimes smarter than the rating agencies,” Fields said.

“I believe so, too,” Goncalves replied. “But they are not smart enough to do without the freaking rating.”

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