The Rising Influence of Rising Affluence

[Democritus_of_Abdera]

CLF eliminates dividend…

As Dew has advocated for some time (#msg-105633398 etc.), CLF has decided to eliminate its dividend and focus upon debt reduction. (see: http://ir.cliffsnaturalresources.com/English/investors/news-releases/news-releases-details/2015/Cliffs-Natural-Resources-Inc-Announces-400-Million-Net-Debt-Reduction-and-Elimination-of-Common-Share-Dividend/default.aspx ).

During the past quarter (Q3) CLF reduced debt by about $400M… This is twice the rate of reduction in the past quarters, a rate supported by the one-time sale of Cliffs Logan County Coal (about $200M).. I expect that a steady state rate reduction will be about $250M/quarter going forward (when the added cash from the dividend reduction is factored in). However, it is likely that there will be other one-time surges in debt payoff if other assets are sold.

Currently, the total debt is about $2.6B (i.e. $3.0B outstanding at the end of Q3 2014 minus the current $0.4B reduction). Albeit, the fair value is about $2.0B due to the discount in the current bond prices…. Thus, the debt load should be reduced to a more manageable $1B in 1-2 yrs.