Iron ore miner Fortescue will refinance entirely high-yield debt worth $US2.16 billion ($A2.78 billion), due in 2022, as it hunts for further savings amid weaker price realisations.
The company says it is raising $US500 million through new high yield bonds carrying a rate of 5.125 per cent, to replace part of the existing senior secured notes, which carry a 9.75 per cent rate.
The balance of the senior notes will be redeemed from the low cost $US1.4 billion syndicated term loan that it raised in February through Chinese, European and Australian financial institutions, and cash on its books.
The entire transaction will result in an annual saving of $130 million in borrowing costs.
Fortescue, the world’s fourth-biggest iron ore exporter, in February unveiled a 44 per cent slide in first-half net profit to $US681 million, mainly on account of wider discounts it has had to offer for its lower grade iron ore.
RBC Capital Markets analyst Paul Hissey said the decision was a logical step to lower borrowing costs and provide a longer-dated debt profile.
“The improved rates for the unsecured notes compared with the secured notes are perhaps indicative of the improved commodity outlook for iron ore – grade discounts and price realisation aside – and general health of Fortescue as a whole,” he said.
Fortescue shares were down 1.2 per cent at $4.89 by 1401 AEDT.