Cliffs Natural Resources announces tender, bonds pop; CGG debt remains firm on Technip offer

By Stephanie N. Rotondo

Phoenix, Nov. 20 – Cliffs Natural Resources Inc. was again the focus of the distressed debt market Thursday as investors reacted to word of a tender offer.

One trader said the bonds jumped 5 to 7 points on the news. Another trader noted that the “higher-priority” notes involved in the tender were up more than other issues.

Meanwhile, CGG SA bonds continued to firm up following news out Wednesday that Technip SA proposed buying out the company for the equivalent of $1.8 billion.

CGG rejected the offer, deeming the bid too low.

“There has definitely been some stuff that was volatile,” a trader said.

For instance, iHeart Communications Inc. – the former Clear Channel Communications Inc. – saw its debt “bouncing around,” the trader said.

The 14% notes due 2021 ticked as low as 77 before ending “closer to 80,” the trader said. The 10% notes due 2018 then fell to 75, but came back up to “around 78.”

At another desk, a trader said “almost $50 million” of the 14% notes traded, inching up half a point to 78. The 10% notes were deemed up 2½ points at 78¼.

Cliffs pops on tender

Cliffs Natural Resources said late Wednesday – very late Wednesday – that it was launching a tender offer for its 6¼% notes due 2020, the 3.95% notes due 2018, the 4 7/8% notes due 2021, the 4.8% notes due 2020 and the 5.9% notes due 2020.

The first two of those issues will get higher priority in the tender than the other issues, which helped them gain more than the others.

One trader said the 6¼% notes traded up to 67 from the low-60s previously. The 4 7/8% notes were meantime pegged around 70.

Another trader said “almost $50 million” of the 6¼% notes were exchanged, rising 8 points to 66 7/8. The 3.95% notes were up 6 points at 79½.

The 4 7/8% notes were seen at 70½, up 4½ points.

However, the trader said both the 5.9% notes and the 4.8% notes were down slightly, at 69¾ and 65¾, respectively.

Under the terms of the tender offer, the company is placing the highest priority on the 6¼% notes and the 3.95% notes. Of those two issues, up to $400 million of the 6¼% notes will be accepted and up to $100 million of the 3.95% notes will be accepted.

Holders who participate in the deal will receive $650 per each $1,000 of the 6¼% notes and $800 for each $1,000 of the 3.95% notes.

There is currently $800 million of the 6¼% notes outstanding and $500 million of the 3.95% notes.

Of the other notes the company is looking to tender, there are no tender caps. Holders will receive $710 for each $1,000 of the 4 7/8% notes, $715 for each $1,000 of the 4.8% notes and $735 for each $1,000 of the 5.9% notes.

The tender will expire at 5 p.m. ET on Dec. 3.

The tender offer will be funded with a new $1.1 billion offering of debt securities coming due prior to the 2020 notes. Additionally, the company said it is entering into a new secured asset-based revolving credit facility with availability of $500 million to $550 million.

News of the tender follows news that the company was looking to exit its operations at its Quebec-based Bloom Lake mine, which it had previously been looking for an investment partner for.

The company said that while it had interested investors, it could not get a deal done in a time frame that was acceptable to the company.

There is a likelihood that the mine could be shut down while the iron ore producer pursues its options. That could result in costs of up to $700 million.

CGG stays firm

CGG’s debt continued to be firm Thursday, a trader reported.

He said the 6½% notes due 2021 and the 6 7/8% notes due 2088 were up 7 points, at 95 and 96, respectively.

Another market source called the 6½% notes 3 points higher at 97 bid.

On Wednesday, the French seismic data services provider to the oil and gas industry CGG said it had rejected a $1.8 billion offer from Technip. CGG said the offer was too low.

However, talks are ongoing.

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