Cliffs extends early deadline in exchange, ups price for 3.95% notes

By Susanna Moon

Chicago, Feb. 10 – Cliffs Natural Resources Inc. said investors had tendered for exchange about $465.3 million of several series of its notes as of 5 p.m. ET on Feb. 9, the original early tender date.

Cliffs also amended the early tender deadline to 5 p.m. ET on Feb. 26 and increased the exchange value for its 3.95% senior notes due Jan. 15, 2018, according to a company announcement.

The company is offering to exchange up to $710 million principal amount of its newly issued 8% 1.5-lien senior secured notes due 2020 for several series of its notes.

Based on the early results, Cliffs would issue about $197 million of new 8% 1.5-lien notes in exchange for notes tendered so far.

The breakdown for the early tendered notes is as follows:

• $14.8 million of the $311,161,000 3.95% senior notes due Jan. 15, 2018, which have a current coupon of 5.95%;

• $53.8 million of the $290,779,000 5.9% senior notes due March 15, 2020;

• $92 million of the $544,156,000 7¾% second-lien notes due March 31, 2020;

• $42.7 million of the $306,667,000 4.8% senior notes due Oct. 1, 2020;

• $69.4 million of the $412,528,000 4 7/8% senior notes due April 1, 2021; and

• $192.6 million of the $492,815,000 6¼% senior notes due Oct. 1, 2040.

The exchange offers will continue until 5 p.m. ET on Feb. 26. The exchange offers began on Jan. 27.

Tenders may no longer be withdrawn, as of the original early deadline.

The principal amount of new 1.5-lien notes to be issued in the exchange offers is limited to $710 million. If the offers are oversubscribed, only an aggregate principal amount of notes that results in the issue of new 1.5-lien notes of up to the maximum exchange amount will be accepted for exchange on a pro rata basis, with no series of notes having priority over any other series, provided that 3.95% senior notes due 2018 will be accepted for exchange before any other existing motes, and accordingly will not be subject to any proration, according to a previous company press release.

“We are very pleased with the early results of the debt exchange which to date will generate annual interest expense savings of $13 million and debt reduction of $268 million,” Lourenco Goncalves, Cliffs’ chairman, president and chief executive officer, said in the press release on Wednesday.

“Furthermore, with 17 days remaining in the exchange offer, we are extending the early tender deadline across the entire series of bonds as well as increasing the total exchange consideration on the 3.95% senior notes due 2018 from $500 to $650. We believe this additional consideration will provide further incentive for the holders of the 3.95% senior notes due 2018 to participate in this exchange.”

Exchange value

The total exchange value for each $1,000 principal amount will be

• $650, up from $500, for the $311,161,000 3.95% senior notes due Jan. 15, 2018, which have a current coupon of 5.95%;

• $400 for the $290,779,000 5.9% senior notes due March 15, 2020;

• $500 for the $544,156,000 7¾% second-lien notes due March 31, 2020;

• $400 for the $306,667,000 4.8% senior notes due Oct. 1, 2020;

• $400 for the $412,528,000 4 7/8% senior notes due April 1, 2021; and

• $390 for the $492,815,000 6¼% senior notes due Oct. 1, 2040.

The total amount includes an early tender premium of $50.00 per $1,000 principal amount of notes tendered for exchange by the early tender deadline, which is now the same as the offer expiration.

Before the change, holders tendering their notes for exchange after the early deadline would have received the exchange payment, or the total exchange value less the early premium.

The exchange offers will end at 5 p.m. ET on Feb. 26. The exchange offers began on Jan. 27.

Tenders may no longer be withdrawn.

The company also will pay cash for accrued interest to but excluding the settlement date.

More details

The new 1.5-lien notes will be guaranteed by subsidiaries that directly or indirectly own substantially all of the company’s domestic assets.

The existing notes, other than the 7¾% second-lien notes due 2020, are unsecured and are not guaranteed by any subsidiaries.

The new 1.5-lien notes will be secured by junior first-priority liens on substantially all of the company’s assets and the assets of the subsidiary guarantors, except for the ABL collateral, which consists of accounts receivable, inventory and other assets securing the asset-based lending facility, as well as junior second-priority liens on the ABL collateral. As a result, any existing notes that remain outstanding after the exchange offers will be, other than the second-lien notes, structurally subordinated to the subsidiary guarantees of the new 1.5-lien notes and effectively subordinated to the new 1.5-lien notes to the extent of the collateral for the new 1.5-lien notes.

The exchange offers are not conditioned upon any minimum amount of notes being tendered. The offers may be amended, extended or terminated, in each case either as a whole, or independently for one or more series, the company noted.

The offers are only be made to holders who are qualified institutional buyers under Rule 144A or non-U.S. persons under Regulation S.

Global Bondholder Services Corp. (866 470-4300 or 212 430-3774) is the information agent and depositary.

Cliffs is a Cleveland-based iron ore and coal-mining company.

© 2015 Prospect News.
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