Bloomberg News

Cliffs Amends $1.75 Billion Credit Pact to Avoid Default

June 30, 2014

Cliffs Natural Resources Inc. (CLF:US), the largest U.S. iron ore producer, received consent from lenders to amend terms on a $1.75 billion revolving credit pact before it falls out of compliance with a financial health test.

Cliffs’ creditors agreed to get rid of a covenant that restricted the amount of debt it holds relative to earnings before interest, taxes, depreciation and amortization in place of a debt-to-capitalization measure of less than 45 percent, the Cleveland-based company said today in a statement distributed by Globe Newswire.

Lenders also are requiring the company to maintain a ratio of Ebitda-to-interest of at least 3.5 times and placed restrictions on dividend increases, share repurchases and the company’s ability to issue priority debt, the statement said.

The company, which has more than $3 billion in outstanding borrowings, has been battling a decline in the price of iron ore, which has fallen about 50 percent since its 2011 peak. Cliffs has also been under pressure from hedge fund Casablanca Capital LP, with the activist investor pressing the company to spin off foreign assets and double its dividends, and is engaged in a proxy fight to change its board.

The amendments to the revolver will be applicable through its maturity in October 2017. Cliffs had borrowed about $180 million from the credit line at the end of last quarter, according to data compiled by Bloomberg.

The price of iron ore delivered to China has fallen to $93.80 per dry metric ton, from as much as $185.6 in January 2011, according to prices compiled by The Steel Index Ltd.

To contact the reporter on this story: Sridhar Natarajan in New York at snatarajan15@bloomberg.net

To contact the editors responsible for this story: Shannon D. Harrington at sharrington6@bloomberg.net Richard Bravo, Faris Khan


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Companies Mentioned

  • CLF
    (Cliffs Natural Resources Inc)
    • $9.12 USD
    • -0.03
    • -0.33%
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