Published: Tuesday September 18, 2012 MYT 8:23:00 AM
Fortescue wins $4.5 bln respite, talking to potential partners
MELBOURNE: Fortescue Metals Group
The debt facility, fully underwritten by Credit Suisse
The facility also waived earnings-based covenants.
"Fortescue has moved quickly to ensure its capital structure can withstand prolonged market volatility," Chief Executive Nev Power said in a statement.
Trading in Fortescue was halted last week after the stock slumped 14 percent on reports that the company was seeking waivers on its debt covenants. The stock last traded at A$2.99, valuing the company at A$9.3 billion ($9.8 billion).
"This is going to surprise people, in terms of the speed, the certainty, the magnitude," said an analyst who declined to be named as he had yet to write a note to clients.
He said whether or not iron ore prices improve from their current levels above $100 a metric ton, this would allow the company to cover its debt funding.
"This is a good deal....The stock should be going up today by a decent measure," he said.
FMG shares opened up 15 percent at A$3.44 on the Australian Securities Exchange.
Fortescue, one-third owned by billionaire founder Andrew "Twiggy" Forrest, said it was evaluating approaches from a range of firms to partner in its assets, but said it was not under pressure from lenders to sell any stakes.
"Transactions of this nature are not required under Fortescue's new debt facilities and will only be pursued if they clearly add shareholder value," the company said in a statement to the stock exchange.
Earlier this month, Fortescue announced it was slamming the brakes on plans to triple its iron ore capacity, cutting $1.6 billion in planned capital spending this year, axing hundreds of jobs and selling a power station to preserve cash.
The moves shocked investors, coming less than a week after CEO Power had said the company was comfortable with its funding, remained on track with its expansion, and was confident iron ore prices would recover in the near term.
The price of iron ore <.IO62-CNI=SI> traded as high as $180 a metric ton a year ago, but plummeted to a 3-year low of $86 earlier this month as demand in China shrinks. Late on Friday, benchmark iron ore with 62 percent iron content had rallied to $101.60 a metric ton, according to data provider Steel Index.
Forrest has been fighting not to have his stake diluted in a company he built from scratch. He has spent close to $180 million in recent months to take his holding to 32.8 percent. - Reuters