Bloomberg News

Fortescue to Sell $1 Billion Junk Bonds to Fund Expansion

March 13, 2012

Fortescue Metals Group Ltd. (FMG), Australia’s biggest junk bond issuer, plans to sell $1 billion of senior unsecured notes to help fund an expansion of its iron ore operations and to buy mining equipment and vehicles.

The high-yield offering will help pay for output growth as well as a mobile mining fleet, the Perth-based company said today in a statement to the Australian stock exchange. The five- and ten-year bonds will be callable after three and five years, respectively, according to a person familiar with the sale, who declined to be identified because terms aren’t set.

Fortescue, Australia’s third-largest iron ore producer, is expanding to meet growing demand in China, the world’s biggest producer of steel. The company, rated BB- by Standard & Poor’s, three levels below investment grade, has $5.6 billion of bonds and loans outstanding, according to data compiled by Bloomberg.

The mining company, which is seeking to almost triple iron ore output to 155 million metric tons, last sold bonds in October when it issued $1.5 billion of 8.25 percent, 2019 notes callable after four years, paying 648 basis points more than similar-maturity Treasuries. The spread on the notes narrowed to 524.8 basis points today, according to prices from Nomura Holdings Inc.

To contact the reporters on this story: Elisabeth Behrmann in Sydney at; Sarah McDonald in Sydney at

To contact the editor responsible for this story: Rebecca Keenan at

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