The Fortescue Metals Group Limited (ASX: FMG) share price has gone up by over 3% after the miner made a debt-related announcement.
Fortescue Metals Group or FMG is a global leader in the iron ore industry, known for its leading development of world class infrastructure and mining assets in the Pilbara region of Western Australia. Fortescue was founded in 2003 by Andrew Forrest, who is now one of Australia’s wealthiest people. The vast majority of Fortescue’s iron ore, a steel-making ingredient, is shipped and sold to Chinese customers.
Fortescue’s Latest Bond Offering
Fortescue announced today that it has successfully completed its US600 million offering of senior unsecured notes/bonds, meaning it’ issuing debt, at an interest rate of 4.5% maturing 15 September 2027.
This money will be used for the partial repayment of US$600 million of the outstanding US$1.4 billion 2022 syndicated term loan facility.
Fortescue has also entered into negotiations with its existing lenders for the extension of its term loan maturities of US$600 million to 2025 on the same terms and conditions. The US$200 million balance will be repaid from operating cash.
Fortescue CEO Elizabeth Gaines said: “Following the record financial result in FY19 together with a strong start to FY20, the ongoing strength of Fortescue’s performance has resulted in today’s successful execution of the Senior Unsecured Note offering.
“Fortescue’s balance sheet is structured on investment grade terms which have allowed us to take advantage of market conditions to extend the maturity profile of Fortescue’s debt at a low cost.
“In addition, we are in negotiations to extend the balance of the 2022 Term Loan while maintaining optionality and flexibility to ensure the long term sustainability of our operations, invest in growth and development and continue to deliver returns to our shareholders.”
Is The Fortescue Share Price A Buy?
This move helps Fortescue maintain a good balance sheet and keeps interest costs quite low.
I’m quite wary about buying shares of a cyclical resource business like Fortescue at what appears to be the top of the cycle.
For dividends and long term growth I would much rather buy shares of the reliable businesses in the free report below instead.
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