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CLEVELAND - Cleveland-Cliffs Inc. (NYSE: NYSE:CLF), a prominent North American steel producer, has upsized and priced a significant offering of Senior Guaranteed Notes totaling $1.8 billion, the company disclosed Monday. The offering includes two tranches: $900 million of notes due in 2029 with a 6.875% interest rate, and $900 million due in 2033 carrying a 7.375% interest rate, both issued at par value.
The company's material direct and indirect wholly-owned domestic subsidiaries, barring certain exceptions, will guarantee the notes on a senior unsecured basis. The closing of the notes offering is anticipated on October 22, 2024, contingent upon customary closing conditions.
Cleveland-Cliffs plans to allocate the net proceeds from this offering towards financing a part of the cash consideration for its forthcoming acquisition of Stelco Holdings Inc., which is expected to finalize in the fourth quarter of 2024. The completion of the Stelco acquisition is not a prerequisite for the offering. However, if the acquisition does not materialize by April 14, 2025, or by an extended deadline of July 14, 2025, the notes will be subject to a special mandatory redemption at their initial issue price plus accrued interest.
The notes and related guarantees have been offered to qualified institutional buyers and non-U.S. persons outside the United States, in compliance with the Securities Act of 1933 exemptions. They have not been registered under the Securities Act or other jurisdictions' securities laws and cannot be sold in the U.S. without registration or an applicable exemption.
This press release statement serves as the basis for the information reported. It should not be considered an offer to sell or a solicitation of an offer to buy any securities. The notes and their guarantees are not available for general public purchase.
Cleveland-Cliffs, headquartered in Ohio, is a vertically integrated steel producer focusing on value-added sheet products, primarily serving the automotive industry. The company, which employs around 28,000 people, operates across the United States and Canada.
In other recent news, steel producer Cleveland-Cliffs Inc. has announced a series of significant developments. The company plans to issue $1.6 billion in Senior Guaranteed Notes, aimed at partially financing the acquisition of Stelco Holdings Inc., which has been approved by Stelco's shareholders. The acquisition is expected to be finalized in the fourth quarter of 2024.
Cleveland-Cliffs is also in negotiations with the Department of Energy for potential funding to revamp its Middletown Works facility in Ohio, with the goal of reducing carbon emissions and production costs. In the realm of analyst notes, Citi has maintained a Neutral rating for Cleveland-Cliffs, while Seaport Global Securities upgraded the company's stock rating to Buy.
On the financial front, Cleveland-Cliffs reported a robust second quarter in 2024, with an adjusted EBITDA of $323 million and significant net debt reduction. The company also amended its $4.75 billion Asset-Based Lending facility to facilitate the Stelco acquisition. These recent developments highlight Cleveland-Cliffs' strategic moves and financial performance.
InvestingPro Insights
Cleveland-Cliffs Inc.'s recent move to raise $1.8 billion through Senior Guaranteed Notes aligns with its strategic acquisition plans and reflects the company's financial maneuvering in a challenging market environment. According to InvestingPro data, Cleveland-Cliffs currently has a market capitalization of $5.95 billion, which puts the size of this debt offering into perspective.
The company's financial position shows some interesting dynamics. While Cleveland-Cliffs has a high P/E ratio of 142.25, its adjusted P/E ratio for the last twelve months as of Q2 2024 stands at a more modest 36.4. This discrepancy suggests that one-time events or adjustments may be impacting the company's earnings picture.
InvestingPro Tips highlight that management has been aggressively buying back shares, indicating confidence in the company's value. This strategy, combined with the high shareholder yield, could be seen as an effort to support the stock price, which has taken a significant hit over the last six months with a -42.11% return.
The company's revenue for the last twelve months as of Q2 2024 was $21.01 billion, with a revenue growth of -4.4% over the same period. This decline in revenue, coupled with the fact that 3 analysts have revised their earnings downwards for the upcoming period, may explain the company's need for additional financing through the notes offering.
Despite these challenges, Cleveland-Cliffs remains profitable, with analysts predicting continued profitability this year. The company's valuation implies a strong free cash flow yield, which could be attractive to investors looking beyond current market volatility.
For readers interested in a more comprehensive analysis, InvestingPro offers 12 additional tips for Cleveland-Cliffs, providing a deeper understanding of the company's financial health and market position.
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