Replies to post #14203 on The Rising Influence of Rising Affluence

[Nebuchadnezzar]

no matter how you slice it, this company is on the right path and steel will be needed in much demand over the next 4, 8 -10 years..

this stock will be much higher in 12 months

[Democritus_of_Abdera]

Re: CLF’s intended $600M bond issue to supplement stock offering…

Per the preliminary prospectus you posted in #msg-128584413, it looks like CLF intends to issue $600M new senior unsecured bonds in addition to the 57M shares (estimated approximate $500M net, pg S-18).

Since they anticipate reducing the aggregate principle amount of the current bonds by approximately $400M, pg S-16), their debt load will actually increase by about $200M…. But, presumably, at a much better interest rate. This might impact your back of the envelope calculations.

https://www.sec.gov/Archives/edgar/data/764065/000076406517000025/prospectus424b5document.htm

pg S-6

Consistent with our strategy to strengthen our balance sheet and debt profile by, among other things, extending outstanding debt maturities, in the near term, we intend to issue approximately $600.0 million aggregate principal amount of senior unsecured long-term debt with an expected tenure of approximately eight years, the net proceeds of which would be used, along with a portion of the net proceeds from this offering, to redeem all of our outstanding 1.5 Lien Notes and Second Lien Notes. We refer to the proposed senior unsecured long-term debt issuance as the "Proposed Debt Refinancing." We refer to this offering and the Proposed Debt Refinancing and the use of the net proceeds therefrom, including the repurchase of the tender notes in the tender offers and the redemption of our Secured Notes, collectively, as the "Refinancing Transactions."

pg S-16

Our First Lien Notes bear interest at a rate of 8.25% per year and mature on March 31, 2020. Our 1.5 Lien Notes bear interest at a rate of 7.75% per year and mature on September 30, 2020. Our Second Lien Notes bear interest at a rate of 8.00% per year and mature on March 31, 2020.

As of December 31, 2016, $540.0 million, $218.5 million and $430.1 million aggregate principal amount of our First Lien Notes, 1.5 Lien Notes and Second Lien Notes, respectively, remained outstanding.

pg S-19

It is anticipated that long-term debt due to the currently outstanding bonds will be reduced from $2,175M to $1,791M.

The as adjusted column assumes:
(a) the repurchase in the tender offers of $72.3 million aggregate principal amount of the 5.900% 2020 Notes, $75.9 million aggregate principal amount of the 4.80% 2020 Notes and $99.2 million of the 2021 Notes with a portion of the net proceeds from this offering, but does not reflect the payment of accrued and unpaid interest on the tender notes, and
(b) the redemption of all of our outstanding 1.5 Lien Notes and Second Lien Notes and $140.5 million aggregate principal amount of our First Lien Notes with the net proceeds from the Proposed Debt Refinancing and a portion of the net proceeds from this offering, but does not reflect the payment of accrued and unpaid interest on such redeemed Secured Notes.

[DewDiligence]

CLF sells 63.25M* shares @$10.75—a much better price than the $10.00 I had hypothesized in my back-of-the-envelope calculation in #msg-128585472:

http://finance.yahoo.com/news/cliffs-natural-resources-inc-prices-000600293.html

The offering will yield net proceeds (after underwriting fees) of about $640M*, reducing CLF’s net debt (for the time being) to less than $1.2B.

That CLF was able to raise that much money at a (relatively narrow) 5% discount to yesterday’s closing price is a bullish sign.

After the offering, CLF will have 296M* basic shares outstanding.

*Assuming exercise of underwriter’s option on 8.25M shares.