CLEVELAND - Cleveland-Cliffs Inc. (NYSE: NYSE:CLF), a major North American steel producer, announced its intention to offer an additional $500 million aggregate principal amount of Senior Guaranteed Notes due 2032, subject to market and other conditions. This offering is part of the company's existing 7.000% Senior Guaranteed Notes due 2032, following an initial issuance of $825 million.
The additional notes will be identical to the initial notes except for the issuance date and issue price. They will be guaranteed on a senior unsecured basis by Cleveland-Cliffs' material direct and indirect wholly-owned domestic subsidiaries, excluding certain subsidiaries.
The proceeds from the sale are earmarked to finance a portion of the cash consideration for the acquisition of Stelco Holdings Inc., which Cleveland-Cliffs expects to complete in the fourth quarter of 2024, pending the satisfaction or waiver of conditions. Prior to the acquisition's completion, the company plans to use the proceeds to pay off the entire outstanding balance under its asset-based lending facility.
The securities will be offered only to qualified institutional buyers and non-U.S. persons outside the United States, in accordance with Rule 144A and Regulation S under the Securities Act of 1933, respectively. These notes and related guarantees have not been registered under the Securities Act or any state securities laws and may not be offered or sold in the U.S. without registration or an applicable exemption.
Cleveland-Cliffs specializes in value-added steel products, particularly for the automotive industry, and is vertically integrated from mining to steelmaking and downstream processes. The company, headquartered in Ohio, employs approximately 28,000 people in its U.S. and Canadian operations.
The announcement of the senior notes offering is based on a press release statement and does not constitute an offer to sell or a solicitation of an offer to buy any securities.
In other recent news, Cleveland-Cliffs Inc. reported a robust Q2 2024 performance with strong cash flow generation and significant net debt reduction. The company's effective management and resilient demand from the automotive sector led to an adjusted EBITDA of $323 million. The company also reduced its net debt by $237 million and allocated 35% of its free cash flow for share buybacks.
Cleveland-Cliffs is strategically focusing on high-margin businesses and is expected to enhance profit margins with the upcoming acquisition of Stelco. The company, which is the sole supplier of grain-oriented electrical steel, has set new carbon emissions targets aiming for a 30% reduction by 2035.
Moreover, CEO Lourenco Goncalves emphasized the transformative potential of the Stelco acquisition and the company's success with previous acquisitions. The company is also planning to repurpose the Weirton plant to produce transformers, with operations potentially starting before the end of 2025. These are among the recent developments at Cleveland-Cliffs as it continues to navigate the complexities of the steel industry.
InvestingPro Insights
In light of Cleveland-Cliffs Inc.'s (NYSE: CLF) recent announcement regarding its senior notes offering, a dive into the company's financial health and market performance provides valuable context for investors. According to InvestingPro data, Cleveland-Cliffs has a market capitalization of $5.96 billion, reflecting its standing in the industry. The company's P/E ratio, based on the last twelve months as of Q2 2024, stands at 36.4. This figure is worth noting as it may influence investor perception in the context of the company's earnings potential and market valuation.
InvestingPro Tips highlight two key points that may interest shareholders and potential investors. Firstly, management's aggressive share buyback initiative signals confidence in the company's valuation and future prospects. Secondly, the high shareholder yield suggests that Cleveland-Cliffs is committed to returning value to its investors, which can be an attractive point for those looking for income-generating investments.
Despite recent challenges reflected in the company's gross profit margins, which stand at 5.21%, and a decrease in revenue growth by 4.4% over the last twelve months as of Q2 2024, Cleveland-Cliffs is moving forward with strategic acquisitions that could potentially bolster its market position. The acquisition of Stelco Holdings Inc. is a step in that direction, funded in part by the proceeds from the senior notes offering.
For investors seeking a more comprehensive analysis, InvestingPro offers additional insights, with a total of 16 tips for Cleveland-Cliffs available on the platform. These tips provide a deeper understanding of the company's financials, market performance, and what analysts are predicting for the future.
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