CLEVELAND - Cleveland-Cliffs Inc. (NYSE: NYSE:CLF), a prominent North American steel producer, announced it has upsized and priced an additional $600 million in Senior Guaranteed Notes due 2032, to aid in financing the forthcoming acquisition of Stelco.
The offering, exempt from the Securities Act of 1933's registration requirements, is set to close on August 16, 2024, contingent on customary closing conditions.
The 7% annual interest-bearing Additional Notes will be issued at 99.25% of their principal amount. They are guaranteed by the company’s significant wholly-owned domestic subsidiaries, excluding certain ones. This strategic financial move is expected to bolster Cleveland-Cliffs' pro-forma liquidity to approximately $4.3 billion post-offering.
Proceeds from this offering are earmarked for a portion of the cash consideration in the Stelco Acquisition, anticipated to finalize in Q4 of 2024, subject to the fulfillment or waiver of conditions. Until then, funds will be used to clear the outstanding balance on the company’s asset-based lending facility and to increase cash on hand.
In other recent news, Cleveland-Cliffs Inc. has announced its intention to offer an additional $500 million in Senior Guaranteed Notes due 2032, with the proceeds earmarked to finance a portion of the cash consideration for the acquisition of Stelco Holdings Inc. This acquisition is expected to be completed in the fourth quarter of 2024. In the interim, the company plans to use the proceeds to pay off its entire outstanding balance under its asset-based lending facility.
The company also reported a robust Q2 2024 performance, with an adjusted EBITDA of $323 million and a significant net debt reduction of $237 million. A substantial portion of its free cash flow, 35%, was allocated for share buybacks. Furthermore, Cleveland-Cliffs is strategically focusing on high-margin businesses, which is expected to enhance profit margins with the upcoming acquisition of Stelco.
InvestingPro Insights
As Cleveland-Cliffs Inc. (NYSE: CLF) prepares for its strategic acquisition of Stelco and the issuance of additional Senior Guaranteed Notes, the company's financial health and market performance remain pivotal for investors. According to InvestingPro, Cleveland-Cliffs is currently trading at a high earnings multiple, with a P/E ratio of 146.07, indicating a premium valuation compared to industry peers.
InvestingPro Tips highlight that management has been proactively buying back shares, a sign of confidence in the company's future prospects. Additionally, the stock's Relative Strength Index (RSI) suggests it is in oversold territory, potentially indicating a buying opportunity for value investors.
The company's market capitalization stands at $6.11 billion, reflecting its position within the steel production industry. Despite a revenue decline of 4.4% over the last twelve months as of Q2 2024, Cleveland-Cliffs maintains a notable gross profit margin of 5.21%, which, while modest, underscores the company's ability to manage costs effectively.
Investors should note that the stock has experienced significant price volatility, with a decrease of over 28% in the last three months. This may be influenced by broader market trends or sector-specific challenges. For those interested in further insights, InvestingPro provides an additional 15 tips for a comprehensive analysis of Cleveland-Cliffs' investment potential.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.