Cleveland-Cliffs Announces Upsizing and Pricing of $825 Million of Senior Unsecured Guaranteed Notes due 2032

Rhea-AI Summary

Cleveland-Cliffs Inc. (NYSE: CLF) has priced $825 million senior unsecured guaranteed notes due 2032 in an exempt offering. The Notes bear 7.000% interest and will be used to repurchase existing Secured Notes. The offering is expected to close on March 18, 2024.

Insights

Financial Analyst

The upsizing and pricing of $825 million in senior unsecured guaranteed notes by Cleveland-Cliffs Inc. reflects a strategic financial maneuver aimed at optimizing the company's capital structure. By issuing these notes at a 7.000% interest rate, which is above the current average for corporate debt, the company is likely addressing a higher risk perception among investors or a strategic decision to lock in long-term financing despite the higher cost. This move to repurchase or redeem the existing 6.750% Senior Secured Notes due 2026 suggests a shift from secured to unsecured debt, which could imply a stronger balance sheet or a desire for greater financial flexibility.

The closing of this offering, contingent on customary conditions, indicates a forward-looking approach to managing debt maturities. However, investors should consider the implications of the new debt's unsecured status, which typically ranks below secured debt in a liquidation scenario, potentially increasing the risk profile for the bondholders. Additionally, the exclusion of certain subsidiaries from the guarantee could impact the overall risk assessment of the notes.

From a market perspective, this refinancing activity could be received with varying sentiments, depending on the investors' outlook on the company's future cash flows and the broader industry dynamics. The use of liquidity on hand in conjunction with the proceeds from the notes to address existing debt obligations also provides insights into the company's liquidity management strategies.

Legal Expert

The offering's exemption from the registration requirements under the Securities Act of 1933 is a significant legal aspect of this transaction. Utilizing Rule 144A, Cleveland-Cliffs is targeting qualified institutional buyers, which allows for a more expedited and less public process than a public offering. The reliance on Regulation S for sales to non-U.S. persons also indicates a strategic approach to tap into international markets while complying with U.S. securities laws.

It is critical to note that the unregistered status of these notes means they cannot be sold in the U.S. to the general public without registration or an applicable exemption. This limitation could impact the secondary market liquidity of the notes. Furthermore, the absence of a redemption notice for the Secured Notes at this stage is a reminder of the procedural and legal steps that must be followed for such corporate actions, which can affect the timing and execution of the intended debt restructuring.

Market Research Analyst

The decision by Cleveland-Cliffs to upsize its note offering could be indicative of strong demand from institutional investors or an anticipation of future capital needs. The steel industry, where Cleveland-Cliffs operates, is cyclical and capital-intensive, often requiring significant financing for operations and growth initiatives. With this upsized offering, the company may be positioning itself to take advantage of potential growth opportunities or to cushion against market downturns.

The annual interest rate of 7.000% on the new notes should be evaluated against the backdrop of the current interest rate environment and credit spreads for similar issuers and maturities. This rate could reflect market expectations of inflation, interest rate trends and the company's creditworthiness. The impact of such a debt issuance on the company's stock performance will hinge on how the market interprets the company's leverage, interest coverage ratios and overall financial health in the context of industry performance and economic conditions.

CLEVELAND--(BUSINESS WIRE)-- Cleveland-Cliffs Inc. (NYSE: CLF) announced today that it has upsized and priced $825 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 bear interest at an annual rate of 7.000% and will be issued at par. 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 offering is expected to close on March 18, 2024, subject to the satisfaction of customary closing conditions.

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.

Source: Cleveland-Cliffs Inc.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240304236923/en/

MEDIA CONTACT:

Patricia Persico

Senior Director, Corporate Communications

(216) 694-5316

INVESTOR CONTACT:

James Kerr

Director, Investor Relations

(216) 694-7719

Source: Cleveland-Cliffs Inc.

FAQ

What is the total principal amount of the senior unsecured guaranteed notes priced by Cleveland-Cliffs Inc.?

Cleveland-Cliffs Inc. has priced $825 million aggregate principal amount of senior unsecured guaranteed notes due 2032.

What is the annual interest rate on the Notes issued by Cleveland-Cliffs Inc.?

The Notes issued by Cleveland-Cliffs Inc. will bear interest at an annual rate of 7.000%.

When is the expected closing date for the offering of the Notes by Cleveland-Cliffs Inc.?

The offering of the Notes by Cleveland-Cliffs Inc. is expected to close on March 18, 2024, subject to customary closing conditions.

How will Cleveland-Cliffs Inc. utilize the net proceeds from the Notes offering?

Cleveland-Cliffs Inc. intends to use the net proceeds from the Notes offering, 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.

Who are the qualified buyers for the offering of the Notes by Cleveland-Cliffs Inc.?

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.