Fortescue secures US$4.5bn debt lifeline
Page 1 of 1
Nicholas Grove is a Morningstar journalist.
Fortescue Metals Group (FMG) on Tuesday said it has secured a US$4.5-billion credit facility that will be used to refinance all of its existing bank facilities.
The facility extends the earliest repayment date for any debt to November 2015 and removes financial maintenance covenants that applied under previous facilities, Fortescue said.
Credit Suisse and JP Morgan have signed a full underwriting commitment for the facility, the company said.
"This action, together with our previously announced measures, will continue to build on Fortescue's profitability, liquidity and above all, removes uncertainty around our financing arrangements," Fortescue CEO Nev Power said in a statement.
"Fortescue has moved quickly to ensure its capital structure can withstand prolonged market volatility."
Fortescue also said it has received "strong interest" in some of its assets from a range of parties.
Fortescue said "transactions of this nature are not required under its new debt facilities and will only be pursued if they clearly add shareholder value".
In a recent note, Morningstar senior resources analyst Mathew Hodge said while a sale and leaseback of Fortescue's assets may help its near-term liquidity, in the longer term it would add permanent operating costs to the business.
"Being a low cost producer is key to having a moat in iron ore mining. Fortescue is not a low-cost provider and adding costs through sale and leaseback transactions will take them further from that ambitious, aspirational goal," he said.
"As a higher-cost miner with a weak balance sheet that is undertaking significant near-term capital expenditure, what happens to the iron ore price in the immediate future is critical."