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Cliffs Natural to Offer Senior Secured Notes Worth $500M - Analyst Blog

Cliffs Natural ResourcesCLF , last week, said that it plans to sell $500 million aggregate principal amount of senior secured notes due 2020 subject to market and other conditions. The offering is exempt from the registration requirements of the Securities Act of 1933.

The proposed notes offering will be jointly, fully and unconditionally guaranteed on a senior secured basis by substantially all of the company's material domestic subsidiaries.

Cliffs plans to utilize the net proceeds from the notes offering to pay back all amounts outstanding under its current revolving credit facility and for general corporate purposes. The offering is conditioned on the replacement of Cliffs' existing revolving credit facility with a new senior secured asset-based credit facility.

Cliffs shares closed roughly 6% lower at $4.31 last Thursday. The stock is down around 40% so far this year.

Cliffs swung to a loss in the fourth quarter of 2014, reported on Feb 2, on hefty asset impairment charges, mostly related to its Eastern Canadian Iron Ore division. Adjusted earnings, however, topped the Zacks Consensus Estimate. Revenues fell by double-digits year over year, but beat expectations. Cliffs sees continued economic growth in the U.S. to support domestic steel production and demand for steelmaking raw materials in 2015.

Cliffs will benefit from its pellet supply contracts with its U.S. iron ore customers which will help it to mitigate the impact of fluctuation in seaborne iron ore pricing. Moreover, the decision to exit the Eastern Canadian Iron Ore business represents another positive for Cliffs. The move has allowed the company to shift into a pure-play U.S. iron ore supplier.

Cliffs is also focusing on cost management amid a weak pricing environment, reflected by reduction in its selling, general and administrative (SG&A) expenses in 2014. The company plans to further reduce SG&A costs in 2015.

Cliffs also remains focused on deleveraging its balance sheet. The company repaid net debt worth $300 million during the fourth quarter and ended 2014 with total debt of roughly $3 billion. Cliffs further cut its net debt by $100 million in Jan 2015, using the net proceeds from the sale of its Logan County coal assets and cash from operations.

However, Cliffs' North American Coal segment still remains under pressure due to weak pricing for coal products. Seaborne iron ore prices are also expected to remain weak in the near future.

Cliffs currently has a Zacks Rank #2 (Buy).

Other companies in the mining space worth considering include Energy Fuels Inc. UUUU , NovaCopper Inc. NCQ and Denison Mines Corp. DNN . While both Energy Fuels and NovaCopper retain a Zacks Rank #1 (Strong Buy), Denison Mines is a Zacks Rank #2 (Buy) stock.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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