Fortescue pulls $2.5bn bond issue
PERTH (miningweekly.com) – Iron-ore major Fortescue Metals on Wednesday scrapped the $2.5-billion senior secured note offering and refinancing plan, blaming volatile credit markets.
Fortescue had planned to launch a $2.5-billion senior secured debt issue, and offered holders of its 2017, 2018 and 2019 senior unsecured notes the opportunity to tender their notes for repurchase, subject to a cap on the 2019 notes.
CEO Nev Power said at the time that the refinancing would extend the company’s debt maturity profile while maintaining flexibility and minimising interest costs.
However, the miner said on Wednesday that while Fortescue had received investment grade ratings on the secured offering along with significant investor interest, volatility in the US credit markets resulted in terms and conditions that did not meet the company’s cost objectives.
“While we have no debt maturing until April 2017, the objective of the refinancing was to extend Fortescue’s maturity profile and minimise interest costs. Debt capital markets were not favourable at this time and as a result, we think it is a disciplined and prudent decision to defer the voluntary refinancing at this stage,” Power said.
Some 60% of the company’s debt remained available for early repayment or financing prior to maturity. Power pointed out that the company’s cash on hand and positive operating cash flow would continue to provide a strong basis for voluntary repayment or refinancing of debt well in advance of maturities.
Fortescue’s shares took a beating on the news, falling by 5.3% to trade at A$1.87 apiece by late afternoon. Earlier in the day, the stock, which closed at A$1.97 a share on Tuesday, traded as low as A$1.80 apiece.
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