Cliffs Natural Resources (NYSE: CLF), a major producer of iron ore and metallurgical coal, announced June 30 that it has entered into an agreement to amend its existing $1.75bn unsecured revolving credit facility with its syndicate of banking partners.
The agreement replaces the existing leverage covenant ratio with a Debt-to-Capitalization ratio for the life of the facility in order to provide the company a more consistent source of liquidity. This amended facility retains substantial financial flexibility for management to continue making prudent business decisions during this period of pricing volatility, the company added.
Unlike the prior amendment completed in the first quarter of 2013, this amendment addresses the leverage covenant for the life of the facility, while also retaining the full $1.75bn facility size and the existing maturity date of Oct. 16, 2017.
Cliffs said that it has undertaken proactive measures to manage its debt and liquidity profile in order to further strengthen its balance sheet as iron ore and met coal prices continue to be volatile. The completion of the amendment is further evidence of management’s commitment to its balance sheet and liquidity management objectives, the company said.
“The execution of this amendment with the unanimous support of our lender group highlights the excellent relationships we maintain with our banking partners and the confidence they have in Cliffs’ management team,” said Terry Paradie, Executive Vice President and Chief Financial Officer. “We also view this as an endorsement of the underlying fundamentals of Cliffs’ long-term strategy. Our banking partners understand that Cliffs operates in a highly cyclical industry and, with this amendment, they have pledged their continued support of the Company.”
Cliffs has tested each of the covenants under a variety of pricing scenarios and is confident in the flexibility that the amended terms provide. The company said it expects to continue making progress on reducing costs, strengthening its balance sheet with cash flows from operations, and taking a disciplined approach to capital spending, all consistent with its target leverage metrics and desire to reduce net debt.
Cleveland, Ohio-based Cliffs is a major global iron ore producer, and also a significant producer of high-and low-volatile metallurgical coal from mines in Alabama and southern West Virginia.