Fitch rates Fortescue notes BB+

Fitch Ratings said it assigned Fortescue Metals Group Ltd.’s (BB+/stable) proposed $500 million senior unsecured notes due 2023 an expected rating of BB+(EXP).

The proposed notes will be issued by Fortescue's wholly owned subsidiary, FMG Resources (August 2006) Pty. Ltd., and guaranteed by Fortescue.

Fortescue expects to use the proceeds, together with a recently completely $1.4 billion syndicated term loan, to substantially refinance its outstanding senior secured debt.

Fitch said the proposed notes are rated in line with Fortescue's existing senior unsecured notes, based on our understanding that the notes will be issued with the same terms and conditions as the $1.5 billion senior unsecured notes issued in 2017.

“While we understand that the proposed notes are not explicitly guaranteed by Fortescue's subsidiaries, in Fitch's view, the investors of the proposed notes will have materially the same access to Fortescue's consolidated cash flows as the investors of its existing senior unsecured notes because Fortescue and its key subsidiaries are linked via a deed of cross guarantee,” the agency said in a news release.

“The proposed notes also rank pari passu in right of payment with Fortescue's outstanding senior unsecured debt and have access to share pledge security.”

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