PERTH (miningweekly.com) – Iron-ore miner Fortescue Metals has issued a $1-billion voluntary redemption notice to the trustee of $2.04-billion senior unsecured notes, due in 2015.
The $1-billion notes would be redeemable by December 20, with the remaining balance of the senior unsecured notes expected to be retired in advance of maturity, in the coming months, and subject to market conditions.
“The repayment of the 2015 notes is a historical turning point for the company and consistent with our well communicated strategy to repay the debt that funded our expansion,” said Fortescue CEO Nev Power.
He noted that Fortescue had consistently delivered against its commitments, and would continue to rapidly de-gear the company’s balance sheet.
“The ability to take these concrete steps validates our strategy that allowed us to expand rapidly to meet customer demand and deliver significant shareholder value.”
CFO Stephen Pearce noted that the company’s strong financial position, along with the reduction in capital expenditure, as Fortescue neared the end of its expansion to 155-million tonnes a year, had enabled it to start its debt repayments in 2013.
“This continues to lower Fortescue’s cost base and, together with the recently completed term loan re-pricing, means Fortescue’s interest costs will immediately reduce by $132-million a year.”
Pearce noted that further repayments and the potential step-down in the term loan margin would provide further interest cost savings.
“Free cash flow generated from expanded production capacity and a focus on lowering costs will be applied to further debt reductions, reducing gearing towards 40%, improving earnings and, overall, strengthening Fortescue’s balance sheet,” he added.
On Monday, Fortescue reported that it had succesfully repriced its $4.95-billion term loan, which would save it $50-million a year in interest payments.
Lead arrangers Credit Suisse and JP Morgan have amended and repriced the facility, which reduced the previous margin of 4.25% to 3.25% and extended the maturity by 21 months to June 30, 2019. Fortescue said that the margin of 3.25% would decrease further as the company reduced leverage through debt reduction. If the miner achieved a leverage ratio of 2.5 times or less, the margin would reduce to 2.75%. This would represent a total saving of 1.5%.