Australia’s Fortescue shops $1 billion of notes in two tranches; pricing possible Tuesday

By Paul Deckelman

New York, May 9 – Fortescue Metals Group Ltd. was heard by high-yield syndicate sources to be in the market on Tuesday with a $1 billion two-part offering consisting of five- and seven-year senior notes.

The sources said that the bond deal could price as early as Tuesday’s session.

They said the five-year tranche was being talked in a yield range of 5% to 5.25%, with the seven-year piece 37.5 basis points behind the five-year notes.

The Rule 144A and Regulation S transaction would be brought to market via J.P. Morgan Securities LLC, Credit Suisse, Deutsche Bank Securities Inc. and Morgan Stanley & Co. LLC.

The East Perth, Western Australia-based iron ore mining company’s FMG Resources (August 2006) Pty Ltd. subsidiary will be the official issuer of the notes.

The notes will be non-callable for the life of the issue, other than via a call at par within three months of maturity for both tranches.

Fortescue – Australia’s third-largest iron ore producer and the world’s fourth-largest exporter into the seaborne iron-ore market – plans to use the new-deal proceeds to repay term loan debt. It has $976 million of such debt outstanding scheduled to mature in 2019.

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