The Rising Influence of Rising Affluence

[DewDiligence]

Re: CLF net-debt leverage

Cliffs is carrying $3.6B in debt so adding $2,x Bil in additional debt will exceed the 2.5x net debt projection.

Actually, post-merger net debt is expected to be 2.4x trailing-12-month EBITDA (below the 2.5x target) afer accounting for immediate deal synergies—see slide #4 at https://d1io3yog0oux5.cloudfront.net/_5143a591af400ce308144b0fc4097f0e/clevelandcliffs/files/pages/clevelandcliffs/db/1118/description/Cleveland-Cliffs_Announces_the_Acquisition_of_Stelco_-_Slides.pdf .

If EBITDA were to decline during the next year (compared to the trailing 12-month period), then the net-debt leverage ratio would naturally rise, but LG doesn’t think this will happen.

Notably, Moody’s evaluation of the proposed acquisition is that it is positive for CLF’s credit rating. (This was mentioned on yesterday’s CC.)