Cleveland-Cliffs Inc. (NYSE:CLF), a leading mining and natural resources company, has entered into a material definitive agreement, issuing $1.8 billion in senior guaranteed notes, according to an 8-K filing with the Securities and Exchange Commission today. The company has issued $900 million in 6.875% senior notes due in 2029 and another $900 million in 7.375% senior notes due in 2033.
The notes, which are unregistered, were sold in a private transaction exempt from the registration requirements of the Securities Act of 1933. They will not be offered or sold publicly in the United States absent registration or an applicable exemption.
These senior notes rank equally with all of Cleveland-Cliffs' existing and future unsecured senior debt and senior to any future subordinated debt. The notes are guaranteed by the company's material direct and indirect wholly-owned domestic subsidiaries, giving them a structural seniority over any non-guaranteed existing and future debt of the company.
Interest on the notes is payable semi-annually, with the first payment due on May 1, 2025. The 2029 notes will mature on November 1, 2029, and the 2033 notes on May 1, 2033. The company may redeem the notes at any time before their respective maturity dates, with varying redemption prices and conditions.
Cleveland-Cliffs plans to use the net proceeds from the issuance of the notes to finance a portion of the cash consideration for its previously announced acquisition of Stelco Holdings Inc., expected to be completed in the fourth quarter of 2024. If the acquisition does not close by April 14, 2025, or is terminated, the notes will be subject to a special mandatory redemption.
In other recent news, Cleveland-Cliffs is making substantial progress in its acquisition of Stelco Holdings Inc., having cleared significant regulatory hurdles and gained approval from Stelco's shareholders. The company also plans to issue $1.6 billion in Senior Guaranteed Notes to help fund the acquisition. The steel producer is negotiating with the Department of Energy for potential funding to revamp its Middletown Works facility in Ohio, aiming to reduce carbon emissions and production costs.
In terms of financial performance, Cleveland-Cliffs reported an adjusted EBITDA of $323 million for the second quarter of 2024, and it has undertaken significant net debt reduction. Analysts have been attentive to these developments, with Citi maintaining a Neutral rating for Cleveland-Cliffs and Seaport Global Securities upgrading the company's stock rating to Buy.
Meanwhile, China's stock market is experiencing gains following the launch of a new swap facility by the People's Bank of China (PBOC). Despite a slowdown in China's economic growth, there is optimism that the fourth quarter might show improvement. On the global front, the U.S. dollar remains strong, bolstered by positive U.S. economic figures. In contrast, the European Central Bank decided on a quarter-point rate cut, with indications of another potential cut in December.
Lastly, crude oil futures are edging higher, supported by an unexpected decrease in U.S. oil inventories and ongoing tensions in the Middle East.
InvestingPro Insights
Cleveland-Cliffs' recent $1.8 billion senior notes issuance aligns with the company's strategic moves, as reflected in recent InvestingPro data and tips. Despite a challenging market environment, with CLF's stock price down 34.58% over the past six months, the company maintains a market cap of $6.3 billion.
An InvestingPro Tip highlights that management has been aggressively buying back shares, suggesting confidence in the company's future prospects. This share repurchase activity, combined with the new debt issuance for the Stelco acquisition, indicates a proactive approach to capital allocation and growth.
Another relevant InvestingPro Tip notes that CLF's valuation implies a strong free cash flow yield. This could be particularly important as the company takes on additional debt, as it suggests potential for healthy cash generation to service these new obligations.
For investors seeking a deeper understanding of Cleveland-Cliffs' financial position and prospects, InvestingPro offers 12 additional tips, providing a comprehensive view of the company's strengths and challenges in the current market environment.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.