CLEVELAND, OH - Cleveland-Cliffs Inc. (NYSE:CLF), a prominent player in the metal mining industry, has revised its credit agreement in a strategic move linked to the acquisition of Stelco Holdings Inc. The company announced today that it entered into the Sixth Amendment to its Asset-Based Revolving Credit Agreement, which modifies the borrowing conditions to facilitate the financing of a portion of the Stelco purchase price.
This amendment introduces a bifurcation of the existing $4.75 billion lending commitments into two distinct tranches. The first tranche consists of $4.25 billion available to Cleveland-Cliffs and designated U.S. subsidiaries, while the second tranche provides $500 million for certain Canadian subsidiaries. This restructuring of the credit facility is designed to support the company's strategic expansion into the Canadian market.
The Sixth Amendment, agreed upon with lenders and Bank of America N.A. as the administrative agent, simplifies the conditions for borrowing under the Credit Agreement specifically for the Stelco transaction.
The full terms of the amendment will be included in Cleveland-Cliffs' upcoming Quarterly Report on Form 10-Q for the quarter ending September 30, 2024.
The acquisition of Stelco, a Canadian corporation, marks a significant step for Cleveland-Cliffs, expanding its footprint in North America. Details of the acquisition have been outlined in previous communications, and the latest financial arrangements suggest a forward-moving strategy for the Ohio-based company.
Cleveland-Cliffs' approach to revising its borrowing terms showcases its commitment to securing the necessary funds for the Stelco acquisition while maintaining financial flexibility for its operations.
In other recent news, Cleveland-Cliffs has amended its $4.75 billion Asset-Based Lending (ABL) facility to finance the pending acquisition of Stelco Holdings Inc. This strategic move replaces Goldman Sachs’ participation with increased commitments from a consortium of banks, including Bank of America, Wells Fargo, and J.P. Morgan. The company expects to close the Stelco transaction in the fourth quarter of 2024.
Citi has revised its price target for Cleveland-Cliffs to $12.50 from $18.00, maintaining a Neutral rating. The firm's revised EBITDA for the third quarter of 2024 is $155 million, which is below the FactSet consensus of $193 million. Seaport Global Securities has upgraded Cleveland-Cliffs' stock rating from Neutral to Buy, setting a new price target at $16.50.
Cleveland-Cliffs expressed support for President Biden's decision to block the foreign acquisition of U.S. Steel by Nippon Steel. The company is ready to acquire and invest in assets potentially affected by U.S. Steel's actions. In line with these developments, Cleveland-Cliffs issued an additional $600 million in senior guaranteed notes to partially fund the Stelco acquisition.
Cleveland-Cliffs reported a strong second quarter in 2024, with an adjusted EBITDA of $323 million and a significant net debt reduction of $237 million. The company has also secured a four-year labor contract with United Auto Workers Local 600 for its Dearborn Works operations, impacting approximately 1,000 employees.
Finally, the company announced the promotion of Michael Hrosik to Senior Vice President, Commercial, and the appointment of Michael Cooney as the Enterprise Director, Flat-Rolled Steel Sales.
InvestingPro Insights
In light of Cleveland-Cliffs Inc.'s strategic maneuvers, such as the recent amendment to its credit agreement for the acquisition of Stelco Holdings Inc., several metrics and tips from InvestingPro provide further context to the company's financial health and market performance. The market capitalization of Cleveland-Cliffs stands at $5.59 billion, which reflects the company's size and market value. Despite a challenging market, with a revenue decline of 4.4% over the last twelve months as of Q2 2024, Cleveland-Cliffs has managed a gross profit of $1.095 billion, although the gross profit margin is relatively low at 5.21%. This could indicate cost pressures or pricing challenges in their industry segment.
An InvestingPro Tip highlights that management has been aggressively buying back shares, which could be a signal of confidence in the company's future prospects. Additionally, the valuation implies a strong free cash flow yield, suggesting that the company is generating a healthy amount of cash relative to its share price. However, it's important to note that two analysts have revised their earnings downwards for the upcoming period, which may affect investor expectations. For those considering an investment in Cleveland-Cliffs, it's worth noting that the company is trading at a high earnings multiple, with a P/E ratio of 133.71, but this adjusts to a lower 34.05 when looking at the last twelve months as of Q2 2024.
For investors seeking more in-depth analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/CLF, which can provide a more comprehensive view of Cleveland-Cliffs' financials and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.