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Item 1.01. | | Entry into a Material Definitive Agreement. |
On April 14, 2023, Cleveland-Cliffs Inc. (the “Company”) issued $750,000,000 aggregate principal amount of 6.750% senior unsecured guaranteed notes due 2030 (the “Notes”) in a private transaction exempt from the registration requirements of the Securities Act of 1933 (the “Securities Act”). The Notes have not been, and will not be, registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act.
The Notes were issued pursuant to an indenture, dated as of April 14, 2023 (the “Indenture”), among the Company, the guarantors party thereto (the “Guarantors”) and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”).
The Notes bear interest at an annual rate of 6.750%. Interest on the Notes is payable semi-annually in arrears on April 15 and October 15 of each year, commencing on October 15, 2023. The Notes will mature on April 15, 2030.
The Notes are the Company’s general unsecured senior obligations and rank equally in right of payment with all of the Company’s existing and future unsecured senior indebtedness and will rank senior in right of payment to all of the Company’s existing and future subordinated indebtedness. The Notes are effectively subordinated to the Company’s existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness. The Notes are guaranteed on an unsecured senior basis by the Company’s material direct and indirect wholly‑owned domestic subsidiaries and, therefore, are structurally senior to any of the Company’s existing and future indebtedness that is not guaranteed by such guarantors and are structurally subordinated to all existing and future indebtedness and other liabilities of the Company’s subsidiaries that do not guarantee the Notes.
The terms of the Notes are governed by the Indenture. The Indenture contains customary covenants that, among other things, limit the Company’s and its subsidiaries’ ability to create certain liens on property that secure indebtedness, enter into sale and leaseback transactions, merge or consolidate with another company, and transfer or sell all or substantially all of the Company’s assets. Upon the occurrence of a “change of control triggering event,” as defined in the Indenture, the Company is required to offer to repurchase the Notes at 101% of the aggregate principal amount thereof, plus any accrued and unpaid interest, if any, to, but excluding, the repurchase date.
The Company may, at its option, redeem some or all of the Notes at any time and from time to time prior to April 15, 2026, at a price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, plus a “make-whole” premium.
From and after April 15, 2026, the Company may, at its option, redeem some or all of the Notes at an initial redemption price of 103.375% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. Such redemption price will decline each year after April 15, 2026, and will be 100% of their principal amount, plus accrued and unpaid interest, beginning on April 15, 2028.
In addition, at any time and from time to time on or prior to April 15, 2026, the Company may redeem in the aggregate up to 35% of the original aggregate principal amount of the Notes (calculated after giving effect to any issuance of additional notes) with the net cash proceeds from one or more equity offerings, at a redemption price of 106.750%, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, so long as at least 65% of the original aggregate principal amount of the Notes (calculated after giving effect to any issuance of additional notes) issued under the Indenture remain outstanding after each such redemption.
The Indenture contains customary events of default, including failure to make required payments, failure to comply with certain agreements or covenants, failure to pay or acceleration of certain other indebtedness, certain events of bankruptcy and insolvency, and failure to pay certain judgments. An event of default under the Indenture will allow either the Trustee or the holders of at least 25% in aggregate principal amount of the then-outstanding Notes to accelerate, or in certain cases, will automatically cause the acceleration of, the amounts due under the Notes.
The Company intends to use the net proceeds from the Notes to repay a portion of the borrowings outstanding under its existing asset-based revolving credit facility entered into on March 13, 2020.
The foregoing description of the Indenture does not purport to be complete and is qualified in its entirety by reference to the full text of the Indenture, a copy of which is anticipated to be filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023.