New York, November 13, 2012 -- Moody's Investors Service downgraded the corporate family and probability of default ratings of AK Steel Corporation (AK Steel) to B2 from B1 and downgraded the senior unsecured notes and revenue funding bonds to B3 from B2. At the same time, Moody's assigned a B1 rating to the $350 million in senior secured notes due 2018 and a B3 rating to the $125 million exchangeable notes due 2019. The speculative grade liquidity rating remains unchanged at SGL-3. The outlook is negative. This concludes the review for downgrade initiated on September 21, 2012.

RATINGS RATIONALE

The downgrade of the corporate family rating to B2 reflects AK Steel's tightening and weak debt protection metrics and increasing leverage position as challenging conditions in the steel industry continue to compress earnings and cash flow generation. Given the relatively static demand levels, downward trend evidenced in industry capacity utilization levels, and pressure on pricing, we do not expect the company's performance to evidence the level of improvement necessary to be consistent with a B1 corporate family rating over the next eighteen months. Pro forma for the new debt issuance and repayment of outstandings under the asset back revolver we estimate leverage, as measured by the debt/EBITDA ratio to be around 13x. Interest coverage is expected to continue negative to breakeven over the next several quarters.

The B2 corporate family rating considers AK Steel's position as a mid tier steel producer with shipments of approximately 5.4 million tons for the twelve months to September 30, 2012. The company's business mix including a meaningful level of value added products, including coated, electrical and stainless products, as well as its strong contract position are supporting factors in the rating. The rating also captures our expectation that the company's cost position challenges will ease somewhat over the next several quarters given the declines that have been seen in iron ore and coking coal prices, although this improvement is unlikely to make a material change given continued price challenges. The improved liquidity from the debt and equity issues also supports the rating.

However, the company's ability to generate meaningful earnings and cash flow will remain vulnerable to the current level of economic uncertainty surrounding growth rates in the US and China as well as the European sovereign debt crisis and poor economic conditions in Europe. Although AK Steel's business is more exposed to the flat rolled market and not the long products market, we believe the overall industry will continue to face a difficult recovery as long as the important commercial construction market is unable to evidence a good recovery off an extremely depressed level.

The negative outlook reflects our view that industry risks continue to the downside. Should hot rolled prices and utilization levels fall much below current run rates or appear sustainable at only about $600/ton and 70% respectively, the company's financial profile would deteriorate further.

Given the company's weak metrics and our expectations for industry conditions in 2013 to not be materially different from 2012, a rating upgrade is unlikely over the next twelve to eighteen months. Should conditions show some level of sustainable improvement and improving trends, the outlook could be stabilized. The rating could be downgraded should the company's liquidity position deteriorate materially due to ongoing losses and cash burn, EBIT margins not evidence an improving trend to at least 2.5%, EBIT/interest of at least 2x and debt/EBITDA of no greater than 10x.

The principal methodology used in rating AK Steel was the Global Steel Industry Methodology published in October 2012. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Headquartered in West Chester, Ohio AK Steel is a middle tier, integrated steel company producing flat-rolled carbon steels. Revenues for the twelve months through September 30, 2012 were $6.0 billion.

REGULATORY DISCLOSURES

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Carol Cowan VP - Senior Credit Officer Corporate Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Brian Oak MD - Corporate Finance Corporate Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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