The Rising Influence of Rising Affluence

[jbog]

DWP

Cliffs has corporate bonds maturing in 26 years (10/1/40) yielding 8.59%. That indicates to me that investors think it's going to be around for at least 26 more years.

Troubled companies have yields that are much higher.

Standard & Poor’s cut to junk its rating on Cliffs Natural Resources Inc. (CLF), the largest U.S. iron ore miner, after the commodity tumbled about 40 percent in 2014.

S&P lowered its rating three steps to BB- from BBB- with a negative outlook, it said in a statement today.

Cliffs shares fell 5.2 percent to $7.82 at 3:22 p.m. in New York. The Cleveland-based company’s $500 million of 3.95 percent bonds due January 2018 dropped 4 cents to 81.5 cents on the dollar at 12:14 p.m., the lowest on record, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The securities yield 11.1 percent.

Cliffs is looking to sell iron ore mines in Canada and Australia. In July, activist investor Casablanca Capital LP pushed through the election of six new board members and installed Lourenco Goncalves as chief executive officer.

Since then, Cliffs has sold a minority holding in Canadian miner Zenyatta Ventures Ltd. and decided to divest a stake in a nickel project being developed by Vancouver-based First Point Minerals Corp.

Cliffs has also announced a plan to buy back as much as $200 million of shares and agreed with lenders to amend a credit facility, allowing the company to proceed with the stock repurchases. The share-repurchase program signals that the board could signal “more aggressive financial policies than in the past,” S&P said today.

In August, Moody’s Investors Service downgraded Cliffs’ corporate family rating by one step to Ba1.

To contact the reporter on this story: Sonja Elmquist in New York at [e-mail]