- Net proceeds will be used to retire approximately $736 million
of senior notes
- Total debt reduced by approximately $181 million through
discount capture
Cleveland-Cliffs Inc. (NYSE: CLF) (“Cliffs”) today announced
that it has offered and priced an additional $555.2 million
aggregate principal amount of Senior Secured Notes due 2025 (the
“Additional Notes”) at a price of 99% of their principal amount in
an offering (the “Additional Notes Offering”) that is exempt from
the registration requirements of the Securities Act of 1933 (the
“Securities Act”). The Additional Notes will be an issuance of
Cliffs’ existing 9.875% Senior Secured Notes due 2025 and will be
issued as additional notes under the indenture dated as of April
17, 2020 (as supplemented, the “Indenture”) pursuant to which
Cliffs previously issued $400 million aggregate principal amount of
9.875% Senior Secured Notes due 2025 (the “Initial Notes”). The
Additional Notes will be of the same class and series as, and
otherwise identical to, the Initial Notes other than with respect
to the date of issuance and issue price.
Cliffs will use the net
proceeds from the Additional Notes Offering to repurchase
approximately $736.4 million aggregate principal amount of its
outstanding senior notes, which will result in debt reduction of
approximately $181.3 million.
Cliffs’ Chairman, President,
and Chief Executive Officer Lourenco Goncalves said, “The unique
backdrop we are in has allowed us to one more time utilize the
playbook that we have used so effectively in the past, creating
value by eliminating certain of our debt that is trading at
discounts to par. By doing so, with this well timed transaction we
are reducing our debt by $181 million.” Mr. Goncalves added, “As
always, we will continue to evaluate and possibly execute new
liability management transactions to improve our balance
sheet.”
The Additional Notes will be
guaranteed on a senior secured basis by Cliffs’ material wholly
owned domestic subsidiaries (subject to certain exceptions and
permitted liens), and secured by (i) a first-priority lien on
substantially all of Cliffs’ assets and the assets of the
guarantors (other than accounts receivable and other rights to
payment, inventory, as-extracted collateral, investment property,
certain general intangibles and commercial tort claims, certain
mobile equipment, commodities accounts, deposit accounts,
securities accounts and other related assets and proceeds and
products of each of the foregoing (collectively, the “ABL
Collateral”)) and (ii) a second-priority lien on the ABL
Collateral, which is junior to a first-priority lien for the
benefit of the lenders under Cliffs’ senior secured asset-based
credit facility (the “ABL Facility”).
The Additional Notes Offering
is expected to close on April 24, 2020, subject to customary
closing conditions.
This news release does not
constitute an offer to sell or the solicitation of an offer to buy
any securities. The Additional Notes and related guarantees are
being offered only to qualified institutional buyers in reliance on
the exemption from registration set forth in Rule 144A under the
Securities Act, and outside the United States, to non-U.S. persons
in reliance on the exemption from registration set forth in
Regulation S under the Securities Act. The Additional Notes and the
related guarantees have not been registered under the Securities
Act, or the securities laws of any state or other jurisdiction, and
may not be offered or sold in the United States without
registration or an applicable exemption from the Securities Act and
applicable state securities or blue sky laws and foreign securities
laws.
About Cleveland-Cliffs
Founded in 1847,
Cleveland-Cliffs is among the largest vertically integrated
producers of differentiated iron ore and steel in North America.
With an emphasis on non-commoditized products, Cliffs is uniquely
positioned to supply both customized iron ore pellets and
sophisticated steel solutions to a quality-focused customer base,
with an industry-leading market share in the automotive industry. A
commitment to environmental sustainability is core to our business
operations and extends to how we partner with stakeholders across
our communities and the steel value chain. Headquartered in
Cleveland, Ohio, Cleveland-Cliffs employs approximately 12,000
people across mining and steel manufacturing operations in the
United States, Canada and Mexico.
Forward-looking Statements
This communication contains certain forward-looking statements
within the meaning of the federal securities laws, including
Section 27A of the Securities Act of 1933, as amended, Section 21E
of the Securities Exchange Act of 1934, as amended, and the safe
harbor provisions of the Private Securities Litigation Reform Act
of 1995. When used in this communication, words such as
“anticipate,” “assume,” “believe,” “build,” “continue,” “create,”
“design,” “estimate,” “expect,” “focus,” “forecast,” “future,”
“goal,” “guidance,” “imply,” “intend,” “look,” “objective,”
“opportunity,” “outlook,” “plan,” “position,” “potential,”
“predict,” “project,” “prospective,” “pursue,” “seek,” “strategy,”
“target,” “work,” “could,” “may,” “should,” “will,” “would” or the
negative of such terms or other variations thereof and words and
terms of similar substance used in connection with any discussion
of future plans, actions or events identify forward-looking
statements with respect to our business, strategy and plans,
expectations relating to the merger (the “Merger”) between Cliffs
and AK Steel Holding Corporation (“AK Steel”) and future financial
condition and performance. We caution investors that any
forward-looking statements are subject to risks and uncertainties
that may cause actual results and future trends to differ
materially from those matters expressed in or implied by such
forward-looking statements. Investors are cautioned not to place
undue reliance on forward-looking statements. Among the risks and
uncertainties that could cause actual results to differ from those
described in forward-looking statements are the following: the
severe financial hardship, bankruptcy, temporary or permanent shut
downs or operational challenges, due to the ongoing novel strain of
coronavirus (“COVID-19”) pandemic or otherwise, of one or more of
our major customers, including customers in the automotive market,
key suppliers or contractors, which among other adverse effects,
could lead to reduced demand for our products, increased difficulty
collecting receivables and customers and/or suppliers/contractors
asserting force majeure or other reasons for not performing their
contractual obligations to us; the uncertainty and weaknesses in
global economic conditions, including downward pressure on prices
caused by the ongoing COVID-19 pandemic, oversupply of imported
products, reduced market demand and risks related to U.S.
government actions with respect to Section 232 of the Trade
Expansion Act (as amended by the Trade Act of 1974), the United
States-Mexico-Canada Agreement and/or other trade agreements,
treaties or policies; the uncertainties associated with the highly
competitive and highly cyclical steel industry and reliance on the
demand for steel from the automotive industry; the continued
volatility of iron ore and steel prices and other trends, which may
impact the price adjustment calculations under certain of our sales
contracts; our ability to cost-effectively achieve planned
production rates or levels, including at our hot briquetted iron
(“HBI”) plant once we re-start construction activities, and to
resume full operations, at our facilities that are temporarily
idled due to the COVID-19 pandemic; our ability to successfully
identify and consummate any strategic investments or development
projects, including our HBI plant; the impact of our steel-making
furnace customers reducing their steel production due to the
COVID-19 pandemic or increased market share of steel produced using
other methods or lighter-weight steel alternatives, including
aluminum; our ability to maintain adequate liquidity, our level of
indebtedness and the availability of capital could limit cash flow
available to fund working capital, planned capital expenditures,
acquisitions and other general corporate purposes or ongoing needs
of our business; our actual economic iron ore reserves or
reductions in current mineral estimates, including whether any
mineralized material qualifies as a reserve; the outcome of any
contractual disputes with our customers, joint venture partners or
significant energy, material or service providers or any other
litigation or arbitration; problems or uncertainties with sales
volume or mix, productivity, transportation, environmental
liabilities, employee benefit costs and other risks of the steel
and mining industries; impacts of existing and increasing
governmental regulation and related costs and liabilities,
including failure to receive or maintain required operating and
environmental permits, approvals, modifications or other
authorization of, or from, any governmental or regulatory entity
and costs related to implementing improvements to ensure compliance
with regulatory changes; our ability to maintain appropriate
relations with unions and employees; the ability of our customers,
joint venture partners and third party service providers to meet
their obligations to us on a timely basis or at all; the events or
circumstances that could impair or adversely impact the viability
of a production plant or mine and the carrying value of associated
assets, as well as any resulting impairment charges; the
uncertainties associated with natural disasters, weather
conditions, unanticipated geological conditions, supply or price of
energy, equipment failures and other unexpected events; the
unpredictability and severity of catastrophic events, including
acts of terrorism or outbreak of war or hostilities, as well as
management’s responses to any of the aforementioned factors;
adverse changes in interest rates and tax laws; the potential
existence of significant deficiencies or material weakness in our
internal control over financial reporting; our ability to realize
the anticipated benefits of the Merger and to successfully
integrate the businesses of AK Steel into our existing businesses,
including uncertainties associated with maintaining relationships
with customers, vendors and employees, as well as realizing the
estimated future synergies; the possibility that the Merger may be
less accretive than expected, and may be dilutive, to our earnings
per share, whether as a result of adverse changes in market
conditions, volatility in the commodity prices for iron ore and/or
steel, adverse regulatory developments or otherwise; additional
debt we assumed or issued in connection with the Merger may
negatively impact our credit profile and limit our financial
flexibility; changes in the cost of raw materials and supplies;
supply chain disruptions or poor quality of raw materials or
supplies, including scrap, coal, coke and alloys; disruptions in,
or failures of, our information technology systems, including those
related to cybersecurity; unanticipated costs associated with
healthcare, pension and other postretirement benefits obligations;
and other risks described under the caption “Risk Factors” in
Cliffs’ and AK Steel’s Annual Reports on Form 10-K for the year
ended December 31, 2019 and other periodic reports filed with the
Securities and Exchange Commission.
Unless expressly stated otherwise, forward-looking statements
are based on the expectations and beliefs of the Cliffs management
team based on information currently available. Forward-looking
statements are subject to inherent risks and uncertainties and are
based on assumptions and estimates that are inherently affected by
the operations and business environment of Cliffs, including
economic, competitive, regulatory and operational risks, many of
which are beyond the control of Cliffs and which are difficult to
predict and may turn out to be wrong. The foregoing list of factors
should not be construed to be exhaustive. There is no assurance
that the actions, events or results of the forward-looking
statements will occur, or, if any of them do, when they will occur
or what effect they will have on the results of operations,
financial condition or cash flows of Cliffs. In view of these
uncertainties, Cliffs cautions that investors should not place
undue reliance on any forward-looking statements. Further, any
forward-looking statement speaks only as of the date on which it is
made, and, except as required by law, Cliffs undertakes no
obligation to update or revise any forward-looking statement to
reflect events or circumstances after the date on which it is made
or to reflect the occurrence of anticipated or unanticipated events
or circumstances.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200421005276/en/
Cleveland-Cliffs Investor Relations: Paul Finan Director,
Investor Relations (216) 694-6544 Media: Patricia Persico Director,
Corporate Communications (216) 650-0168
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