Cleveland-Cliffs Inc. Announces Upsizing and Pricing of an Additional $600 Million Senior Guaranteed Notes due 2032

Rhea-AI Summary

Cleveland-Cliffs Inc. (NYSE: CLF) has announced the upsizing and pricing of an additional $600 million in Senior Guaranteed Notes due 2032. The Additional Notes will have a 7.000% annual interest rate and be issued at 99.25% of their principal amount. This upsized offering reduces the capital needed for the upcoming Stelco acquisition financing. The Additional Notes Offering is expected to close on August 16, 2024.

The company's pro-forma liquidity is anticipated to be approximately $4.3 billion after the offering's completion. Cliffs plans to use the net proceeds to finance part of the Stelco Acquisition's cash consideration, expected to conclude in Q4 2024. Prior to the acquisition's completion, Cliffs intends to use the proceeds to pay off its outstanding asset-based lending facility balance and for cash on hand.

Positive

• Upsized offering of $600 million in Senior Guaranteed Notes
• Reduced capital needed for Stelco acquisition financing
• Expected pro-forma liquidity of approximately $4.3 billion post-offering
• Planned payoff of outstanding asset-based lending facility balance

Negative

• 7.000% annual interest rate on Additional Notes
• Notes issued at 99.25% of principal amount, slightly below par value

Financial Analyst

Cleveland-Cliffs' upsizing of its senior notes offering to $600 million is a strategic move to strengthen its financial position ahead of the Stelco acquisition. The 7.000% interest rate, while relatively high, reflects current market conditions and the company's risk profile. The pricing at 99.25% of principal suggests moderate investor demand. Pro-forma liquidity of $4.3 billion post-offering indicates a robust financial cushion, which is important for navigating potential market volatilities and integration challenges. The decision to pay off the asset-based lending facility demonstrates prudent debt management, potentially reducing interest expenses in the short term. However, investors should monitor the impact of this additional debt on the company's leverage ratios and long-term financial health.

Market Research Analyst

The upsized offering of $600 million in senior notes signals strong investor confidence in Cleveland-Cliffs' growth strategy and the steel industry's outlook. This move reduces the company's reliance on acquisition financing for the Stelco deal, potentially offering more favorable terms and flexibility. The expected Q4 2024 completion of the Stelco acquisition aligns with industry consolidation trends, potentially enhancing Cleveland-Cliffs' market position and economies of scale. However, the success of this strategy hinges on effective integration and realizing synergies. Investors should watch for potential shifts in steel demand, especially in key sectors like automotive and construction, which could impact the company's performance post-acquisition.

Legal Expert

The structured offering of additional notes to qualified institutional buyers under Rule 144A and Regulation S exemptions is a common approach for expediting the capital raising process. This method allows Cleveland-Cliffs to avoid the time-consuming SEC registration process while still accessing sophisticated investors. The inclusion of material subsidiaries as guarantors strengthens the notes' appeal but may limit future financial flexibility. Investors should note that these unregistered securities have resale restrictions, potentially affecting liquidity. The expected closing date of August 16, 2024, provides a clear timeline, but remains subject to customary closing conditions. Careful monitoring of the Stelco acquisition's regulatory approvals and closing conditions will be important for assessing the overall transaction risk.

CLEVELAND--(BUSINESS WIRE)-- Cleveland-Cliffs Inc. (NYSE: CLF) (“Cliffs”) announced today that it has upsized and priced an additional $600 million aggregate principal amount of Senior Guaranteed Notes due 2032 (the “Additional Notes”) 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 bear interest at an annual rate of 7.000% and will be issued at a price of 99.25% of their principal amount. The Additional Notes will be guaranteed on a senior unsecured basis by Cliffs’ material direct and indirect wholly-owned domestic subsidiaries, other than certain excluded subsidiaries.

The upsized offering reduces the amount of capital needed to be raised in the forthcoming take-out acquisition financing for the previously announced acquisition of Stelco (the “Stelco Acquisition”). The Additional Notes Offering is expected to close on August 16, 2024, subject to the satisfaction of customary closing conditions. Pro-forma liquidity is expected to be approximately $4.3 billion following the completion of this offering.

Cliffs intends to use the net proceeds from the Additional Notes Offering to finance a portion of the cash consideration payable in connection with the Stelco Acquisition, which Cliffs expects to complete in the fourth quarter of 2024 following the satisfaction or waiver of applicable conditions. Prior to the completion of the Stelco Acquisition, Cliffs intends to use the net proceeds from the Additional Notes Offering to pay off the entire outstanding balance under its asset-based lending facility and for cash on hand.

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 Inc.

Cleveland-Cliffs is a leading North America-based steel producer with focus on value-added sheet products, particularly for the automotive industry. The Company is vertically integrated from the mining of iron ore, production of pellets and direct reduced iron, and processing of ferrous scrap through primary steelmaking and downstream finishing, stamping, tooling, and tubing. 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 the risk that the Stelco Acquisition may not be consummated and if consummated, our ability to realize the anticipated benefits of the Stelco Acquisition.

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, our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2024, and other filings with the U.S. Securities and Exchange Commission.

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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 size and interest rate of Cleveland-Cliffs' (CLF) additional Senior Guaranteed Notes offering?

Cleveland-Cliffs (CLF) has upsized and priced an additional $600 million in Senior Guaranteed Notes due 2032, bearing an annual interest rate of 7.000%.

When is the expected closing date for Cleveland-Cliffs' (CLF) Additional Notes Offering?

The Additional Notes Offering is expected to close on August 16, 2024, subject to the satisfaction of customary closing conditions.

How does Cleveland-Cliffs (CLF) plan to use the proceeds from the Additional Notes Offering?

Cleveland-Cliffs (CLF) intends to use the net proceeds to finance part of the Stelco Acquisition's cash consideration, pay off its outstanding asset-based lending facility balance, and for cash on hand.

What is the expected pro-forma liquidity for Cleveland-Cliffs (CLF) after completing this offering?

Cleveland-Cliffs (CLF) anticipates its pro-forma liquidity to be approximately $4.3 billion following the completion of this offering.