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Cleveland-Cliffs Announces Proposed Offering of $750 Million of Senior Unsecured Guaranteed Notes
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Rhea-AI Summary
Cleveland-Cliffs Inc. (NYSE: CLF) plans to offer $750 million of senior unsecured guaranteed notes due 2032 to repurchase its outstanding 6.750% Senior Secured Notes due 2026. The offering is exempt from registration requirements, targeting qualified institutional buyers and non-U.S. persons.
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Insights
Cleveland-Cliffs Inc.'s announcement regarding the issuance of $750 million in senior unsecured guaranteed notes due 2032 is a strategic financial maneuver that merits a closer look from an investment perspective. The decision to refinance existing debt, specifically the 6.750% Senior Secured Notes due 2026, through this new offering indicates a proactive approach to capital management and debt restructuring. By opting for unsecured notes, the company may be signaling a strong credit profile and confidence in its ability to meet future obligations without the need for collateral.
The use of proceeds to address the Secured Notes suggests an effort to lower interest expenses and extend the maturity profile of the company's debt. This could potentially lead to improved cash flow management and a stronger balance sheet. However, the interest rate of the new notes will be a critical factor in determining the financial benefit of this transaction. If the new notes carry a significantly lower interest rate than the existing secured notes, the company could realize substantial savings. Conversely, if the rate is higher or similar, the benefits may be less pronounced.
Investors and analysts should monitor the market's reception to these notes, as it will provide insight into the company's creditworthiness and the current appetite for corporate debt. The terms of the notes, including the interest rate and covenants, will be key in evaluating the impact on the company's financial flexibility and risk profile.
The legal intricacies of Cleveland-Cliffs Inc.'s note offering are notable, particularly the reliance on exemptions from registration requirements under the Securities Act of 1933. The decision to offer the notes to qualified institutional buyers under Rule 144A and to non-U.S. persons under Regulation S indicates a targeted strategy that could expedite the fundraising process while maintaining compliance with securities regulations.
It is essential to understand that the unregistered nature of these notes means they will be subject to transfer restrictions and may have a more limited secondary market. This could affect the liquidity of the notes, which is an important consideration for institutional investors. The guarantees provided by the company's subsidiaries, excluding certain entities, also raise points of consideration regarding the structural subordination of the notes and the recourse available to noteholders.
Stakeholders should be aware that the absence of a registration statement means less public disclosure than registered offerings, potentially impacting the ability to assess the full risk profile of the investment. The exemption from registration, however, is a common practice for offerings of this nature and is not indicative of any irregularities.
From a market dynamics perspective, Cleveland-Cliffs Inc.'s entry into the corporate bond market with a substantial $750 million offering can be indicative of the company's assessment of market conditions and investor sentiment. The timing of the offering, amidst fluctuating interest rates and economic uncertainty, could suggest that the company is looking to lock in financing before potential rate hikes. The choice to redeem higher-interest debt ahead of maturity could be a strategic move to capitalize on current market conditions.
The broader implications for the industry and similar companies could involve a reassessment of debt structures, as others may follow suit if this offering is well-received. A successful issuance could lead to a benchmark for other companies in the sector considering debt refinancing or fundraising. Conversely, any difficulties in placing the notes could signal a tightening credit market or waning confidence in the sector, which would have ripple effects on similar issuers.
Overall, the response to this offering will provide valuable data on the cost of capital for the industry and may influence future corporate finance strategies.
CLEVELAND--(BUSINESS WIRE)--
Cleveland-Cliffs Inc. (NYSE: CLF) announced today that it intends to offer to sell, subject to market and other conditions, $750 million aggregate principal amount of senior unsecured guaranteed notes due 2032 (the “Notes”) in an offering that is exempt from the registration requirements of the Securities Act of 1933 (the “Securities Act”). The Notes will be guaranteed on a senior unsecured basis by the Company’s material direct and indirect wholly-owned domestic subsidiaries, other than certain excluded subsidiaries.
The Company intends to use the net proceeds from the Notes, along with liquidity on hand, to repurchase in a tender offer or otherwise redeem all of the Company’s outstanding 6.750% Senior Secured Notes due 2026 (the “Secured Notes”).
This news release does not constitute a notice of redemption with respect to the Secured Notes or an offer to sell or the solicitation of an offer to buy any securities. The 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 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 Inc.
Cleveland-Cliffs is the largest flat-rolled steel producer in North America. Founded in 1847 as a mine operator, Cliffs also is the largest manufacturer of iron ore pellets in North America. The Company is vertically integrated from mined raw materials, direct reduced iron, and ferrous scrap to primary steelmaking and downstream finishing, stamping, tooling, and tubing. Cleveland-Cliffs is the largest supplier of steel to the automotive industry in North America and serves a diverse range of other markets due to its comprehensive offering of flat-rolled steel products. Headquartered in Cleveland, Ohio, Cleveland-Cliffs employs approximately 28,000 people across its operations in the United States and Canada.
Forward-Looking Statements
This release contains statements that constitute “forward-looking statements” within the meaning of the federal securities laws. All statements other than historical facts, including, without limitation, statements regarding our current expectations, estimates and projections about our industry or our businesses, are forward-looking statements. 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: continued volatility of steel, iron ore and scrap metal market prices, which directly and indirectly impact the prices of the products that we sell to our customers; uncertainties associated with the highly competitive and cyclical steel industry and our reliance on the demand for steel from the automotive industry; potential weaknesses and uncertainties in global economic conditions, excess global steelmaking capacity, oversupply of iron ore, prevalence of steel imports and reduced market demand; severe financial hardship, bankruptcy, temporary or permanent shutdowns or operational challenges of one or more of our major customers, key suppliers or contractors, which, among other adverse effects, could disrupt our operations or lead to reduced demand for our products, increased difficulty collecting receivables, and customers and/or suppliers asserting force majeure or other reasons for not performing their contractual obligations to us; risks related to U.S. government actions with respect to Section 232 of the Trade Expansion Act of 1962 (as amended by the Trade Act of 1974), the United States-Mexico-Canada Agreement and/or other trade agreements, tariffs, treaties or policies, as well as the uncertainty of obtaining and maintaining effective antidumping and countervailing duty orders to counteract the harmful effects of unfairly traded imports; impacts of existing and increasing governmental regulation, including potential environmental regulations relating to climate change and carbon emissions, and related costs and liabilities, including failure to receive or maintain required operating and environmental permits, approvals, modifications or other authorizations of, or from, any governmental or regulatory authority and costs related to implementing improvements to ensure compliance with regulatory changes, including potential financial assurance requirements, and reclamation and remediation obligations; potential impacts to the environment or exposure to hazardous substances resulting from our operations; our ability to maintain adequate liquidity, our level of indebtedness and the availability of capital could limit our financial flexibility and cash flow necessary to fund working capital, planned capital expenditures, acquisitions, and other general corporate purposes or ongoing needs of our business, or to repurchase our common shares; our ability to reduce our indebtedness or return capital to shareholders within the currently expected timeframes or at all; adverse changes in credit ratings, interest rates, foreign currency rates and tax laws; the outcome of, and costs incurred in connection with, lawsuits, claims, arbitrations or governmental proceedings relating to commercial and business disputes, antitrust claims, environmental matters, government investigations, occupational or personal injury claims, property-related matters, labor and employment matters, or suits involving legacy operations and other matters; supply chain disruptions or changes in the cost, quality or availability of energy sources, including electricity, natural gas and diesel fuel, critical raw materials and supplies, including iron ore, industrial gases, graphite electrodes, scrap metal, chrome, zinc, other alloys, coke and metallurgical coal, and critical manufacturing equipment and spare parts; problems or disruptions associated with transporting products to our customers, moving manufacturing inputs or products internally among our facilities, or suppliers transporting raw materials to us; the risk that the cost or time to implement a strategic or sustaining capital project may prove to be greater than originally anticipated; our ability to consummate any public or private acquisition transactions and to realize any or all of the anticipated benefits or estimated future synergies, as well as to successfully integrate any acquired businesses into our existing businesses; uncertainties associated with natural or human-caused disasters, adverse weather conditions, unanticipated geological conditions, critical equipment failures, infectious disease outbreaks, tailings dam failures and other unexpected events; cybersecurity incidents relating to, disruptions in, or failures of, information technology systems that are managed by us or third parties that host or have access to our data or systems, including the loss, theft or corruption of sensitive or essential business or personal information and the inability to access or control systems; liabilities and costs arising in connection with any business decisions to temporarily or indefinitely idle or permanently close an operating facility or mine, which could adversely impact the carrying value of associated assets and give rise to impairment charges or closure and reclamation obligations, as well as uncertainties associated with restarting any previously idled operating facility or mine; our level of self-insurance and our ability to obtain sufficient third-party insurance to adequately cover potential adverse events and business risks; uncertainties associated with our ability to meet customers’ and suppliers’ decarbonization goals and reduce our greenhouse gas emissions in alignment with our own announced targets; challenges to maintaining our social license to operate with our stakeholders, including the impacts of our operations on local communities, reputational impacts of operating in a carbon-intensive industry that produces greenhouse gas emissions, and our ability to foster a consistent operational and safety track record; our actual economic mineral reserves or reductions in current mineral reserve estimates, and any title defect or loss of any lease, license, easement or other possessory interest for any mining property; our ability to maintain satisfactory labor relations with unions and employees; unanticipated or higher costs associated with pension and other post-employment benefit obligations resulting from changes in the value of plan assets or contribution increases required for unfunded obligations; uncertain availability or cost of skilled workers to fill critical operational positions and potential labor shortages caused by experienced employee attrition or otherwise, as well as our ability to attract, hire, develop and retain key personnel; the amount and timing of any repurchases of our common shares; potential significant deficiencies or material weaknesses in our internal control over financial reporting; and our ability to successfully repurchase and/or redeem the Secured Notes.
For additional factors affecting the business of Cliffs, refer to Part I – Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2023, and other filings with the U.S. Securities and Exchange Commission.
