Cleveland-Cliffs Inc. CLF announced the pricing of an additional $120 million total principal amount of senior secured notes due 2026. The offering is exempted from the registration requirements under the Securities Act of 1933.
Per Cleveland-Cliffs, the additional notes will carry an annual interest rate of 6.75% and they will be issued at a price of 99.25% of the principal amount. Further, the notes will be guaranteed on a senior secured basis by the company’s material fully-owned domestic subsidiaries, which is subject to certain exceptions and permitted liens.
Cleveland-Cliffs plans to use the net proceeds from the offering for financing the construction of its hot briquetted iron ("HBI") production plant. The company may also temporarily reduce borrowings under its asset-based credit facility (ABL Facility).
Notably, the offering is slated to close on Jun 19, 2020, which is subject to customary closing conditions.
Cleveland-Cliffs’ shares have lost 34.7% in the past year compared with the industry’s 7.3% decline.
Earlier this month, Cleveland-Cliffs stated that it will resume the construction of the HBI plant as well as fast-track the restart of its Tilden mining operations in Michigan.
The Toledo HBI facility’s construction was temporarily stopped on Mar 20, due to the coronavirus pandemic. The company has initiated the process of remobilizing workforce for completing the project.
However, the current mandatory social distancing and other newly-employed safety measures are restricting the number of workers allowed to be present simultaneously. As such, the company now expects the construction to get completed in fourth-quarter 2020.
Zacks Rank & Key Picks
Cleveland-Cliffs currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the basic materials space are Alamos Gold Inc. AGI, B2Gold Corp BTG and Franco-Nevada Corporation FNV, all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Alamos Gold has an expected earnings growth rate of 65% for 2020. The company’s shares have surged 40.1% in the past year.
B2Gold has an expected earnings growth rate of 214.3% for 2020. Its shares have returned 76.7% in the past year.
Franco-Nevada has an expected earnings growth rate of 60.2% for 2020. The company’s shares have surged 68.3% in the past year.
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