Cleveland-Cliffs pushes out exchange offer for AK Steel notes

By Wendy Van Sickle

Columbus, Ohio, Feb. 11 – Cleveland-Cliffs Inc. and AK Steel Holding Corp. extended their offers to exchange any and all of AK Steel’s outstanding $270,232,000 of 6 3/8% senior notes due Oct. 15, 2025 (Cusip: 001546AV2) and $391,632,000 of 7% senior notes due March 15, 2027 (Cusip: 001546AU4) for new notes issued by Cleveland-Cliffs and a related consent solicitation.

The exchange offers and consent solicitations will now expire at 6 a.m. ET on March 13, pushed back from 12:01 a.m. ET on Feb. 12.

The offers were announced on Jan. 14 on which date the companies said they expected the expiry to coincide with the date of the consummation of Cleveland-Cliffs’ anticipated acquisition of AK Steel, which is now expected to occur at the time of the new expiry.

As of the early participation date, 5 p.m. ET on Jan. 28, holders tendered $234,768,000 of the 6 3/8% notes and $334,754,000 of the 7% notes for exchange.

As of 3 p.m. ET on Feb. 11, those figures had changed to $231,825,000, or 85.79%, of the 6 3/8% notes and $341,015,000, or 87.08%, of the 7% notes, according to a news release.

The new notes will have the same coupon and maturity as the existing notes.

In conjunction with the exchange offers, AK Steel solicited consents to adopt certain proposed amendments to each of the indentures governing the existing notes to eliminate certain of the covenants, restrictive provisions and events of default.

The companies announced previously that they received the necessary consents from holders to amend the notes. Specifically, 87.06% total consents were delivered for the 6 3/8% notes and 85.56% total consents were delivered for the 7% notes. The amendments are still subject to some conditions.

For each $1,000 principal amount of AK Steel notes tendered for exchange and related consents delivered by the early participation date, holders will receive $1,000 principal amount of new Cleveland-Cliffs notes and a $2.50 cash consent fee.

Holders who tender their notes for exchange after the consent deadline will receive exchange notes in a principal amount equal to the amount of their existing notes tendered for exchange.

The settlement date is expected to be two business days after the expiration date.

The new notes will be guaranteed on a senior unsecured basis by its material direct and indirect wholly owned domestic subsidiaries, including AK Steel, AK Steel Corp. and its subsidiaries that guarantee the existing notes.

The exchange offers are expected to result in reduced liquidity for the existing AK Steel notes and, if adopted, the proposed amendments will remove the restrictive covenants and some other terms of the existing AK Steel notes and will afford reduced protection to holders of those securities. Further, neither Cliffs nor its current subsidiaries will have any obligation, contingent or otherwise, to pay amounts due under the existing AK Steel notes or to make any funds available to pay those amounts, whether by dividend, distribution, loan or other payments.

Following the consummation of the merger, however, AK Steel Corp. will be a subsidiary of Cleveland-Cliffs and will continue to have an obligation to pay amounts due under the existing AK Steel notes.

The exchange offers and consent solicitations are conditioned upon consummation of the merger, and each exchange offer and consent solicitation is conditioned upon completion of the other.

The consummation of the merger is not conditioned upon the successful closing of any exchange offer or consent solicitation.

Global Bondholder Services Corp. (866 924-2200 or 212 430-3774) is the information agent and exchange agent for the exchange offers and consent solicitations.

The issuer is a Cleveland-based iron ore mining company. AK Steel is a West Chester, Ohio-based steel producer.

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