If CLF got more than $800 million out of their Canadian assets and selling off their coal mines, they should use that excess to buy back share now and then sell those shares back into the market in 2017 to pay off the remaining debt.
I believe it they pay them off before 2017, they have to pay an interest penalty. Whereas if they wait until 2017, they can purchase them back at market.
Yes I did. Quality companies interested in their Canadian assets and Quebec is going in for 20% to make a deal happen. We are not talking about Alderon or MFC.
Read the income statement 10Q page 21. Face value is listed on the far left and you will see the columns for carrying value and fair value.
The face value is all the bonds CLF issued. They issued secured bonds that were used to exchange for non secured bonds at market prices which are in CLF's possession. Those bonds in CLF's possession is is taken off the face value and the new amount becomes the carrying value. Then CLF issued secured bonds which some of the proceeds were used to retire unsecured bonds at market prices which is in many cases a 40% discount to the face value. So you increase the debt with secured bonds and retire the secured debt collecting a 40% benefit. In the end, CLF retired $313 million more debt than what they paid.
The best part, by issuing secured bonds, the remaining unsecured bonds have decreased in value in the market allowing CLF to purchase more debt at a discount when they have cash from asset sales. If CLF was to pay off their entire debt, they could do so with $2.1 billion. However, they cannot pay off the $1.25 billion in secured debt until 2017, so if they can net out $800 million out of BL, they could take their debt down to the maximum amount.
That is the total amount of interest if all the bonds were drawn out to the max. Just not the case.
Ok, what you have is $3.7 billion in face value of all their bonds and $2.8809 billion in carrying value which is the total drawn and CLF's actual debt. The market value of their debt which is the amount they would have to pay to retire the debt is $2.0817 billion. Put another way, CLF has an additional $900 million in liquidity.
Letters of intent are not bids and as far as I know, no date has been set for bids to be submitted. What we will find out is the quality of the companies that are interested.
On top, their long term debt of $2,880.9 billion includes building over $400 million in inventories during Q1 which is needed to provide their customers prior to the winter months.
CLF recorded a $313 million gain on extinguishing debt which is the difference between the face value and the price they paid for the bonds.
March 13, 2015 Balance Sheet:
Morningstar is not accounting for the bonds exchange or purchased.
Don't care about the stock or bond price, just looking at their cash and cash equivalents. Then looking at earnings to see that there is no drag on cash, actually they are cash positive after servicing their current debt load.
No one is reading their balance sheet and income statement, they have cash, tax refund and inventories that amount to $900 million now. More than enough to cover what is due on 2018. They don't need to eliminate all debt, they just need to do a better job explaining how they can manage debt which they have been able to service their debt at the low point of iron ore prices. In my opinion, if they get over $500 million selling their Canadian assets, any amount over $500 million should be used to buy back shares, starting with CLV.
Could BHP be one of the companies interested in BL to get into one of RIO's areas at a discounted price?
"BHP slumped 7 percent, the biggest loser on the market, after its spin-off, South32, began trading at A$2.15, at the lower end of the expected range of A$2.00 to A$3.00.
Rival Rio Tinto fell 0.5 percent amid concerns the government will begin an inquiry into both firms' activities that have contributed to a fall in the iron ore price."
Australia is losing tax revenue to the actions of RIO and BHP. Nothing gets a politician moving more than falling revenues and it wouldn't surprise me if they don't impose some type of export tax on excessive shipments.