Cliffs completes refinancing; mum on coal mine sale effort

Cliffs Natural Resources (NYSE: CLF) announced March 30 that it has entered into a new senior secured asset-based revolving credit facility (the “New ABL Facility”) and successfully completed its previously announced private offering of $540 million aggregate principal amount of 8.250% Senior Secured Notes due March 31, 2020.

From the offering of the New First Lien Notes, the company received net proceeds, after the initial purchasers’ discounts and the payment of fees and expenses, of approximately $491.4 million. The company used a portion of the net proceeds from the offering to repay all amounts outstanding under its former revolving credit facility and intends to use the remainder for general corporate purposes. The New ABL Facility is expected to provide up to $550 million in borrowing availability on a revolving basis, subject to a borrowing base limitation and the issuance of letters of credit.

The company also announced that it has successfully completed its previously announced private offers to exchange its newly issued 7.75% Senior Secured Notes due 2020 for certain outstanding senior unsecured notes of Cliffs.

Lourenco Goncalves, Cliffs’ Chairman, President and CEO, stated: “We believe that our new financing structure just put in place through the completion of the Refinancing Transactions will give us all the liquidity and financial flexibility we need to successfully complete the strategy we have executed in a disciplined manner since August 7, 2014, and which differentiates Cliffs from any other iron ore producer in the world. As the largest supplier of pellets in the U.S. and no longer a major participant in the volatile seaborne market, we are very pleased with the backing received from the investment community.”

Goncalves added: “The success of our refinancing makes clear that the investors understand and support our overall strategy, and that Cliffs is better positioned than all other iron ore producers in the world whose fundamentals are fully dependent on supplying sinter feed to China.”

Cliffs didn’t say anything about potential sales of its Pinnacle longwall coal mine in southern West Virginia and Oak Grove longwall coal mine in Alabama. During the fourth quarter of 2014 the company completed the sale of its Cliffs Logan County Coal assets in southern West Virginia for $174m in cash and the assumption of certain liabilities, of which $155m has been collected. The company recorded a loss on the sale of these assets of $420m.

Cliffs’ full-year 2015 North American Coal expected sales and production volume is about 5.5 million tons of low-vol metallurgical coal from the two remaining mines, Pinnacle and Oak Grove. This expectation assumes no additional divestiture of this business in 2015, which may or may not occur, the company has said.

Cliffs is a leading mining and natural resources company in the United States. The company is a major supplier of iron ore pellets to the North American steel industry from its mines and pellet plants located in Michigan and Minnesota. Cliffs also operates an iron ore mining complex in Western Australia. Additionally, Cliffs produces low-vol met coal in the U.S. from its mines in Alabama and West Virginia.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.