Australian iron ore producer Fortescue Metals Group Ltd. (FSUMF, FMG.AX) said Monday it secured a new credit facility of up to $4.5 billion in order to refinance all its existing bank loans and for additional liquidity. The underwritten senior secured credit facility, with maturity period of five years, was committed by two of the world's leading banks, Credit Suisse Group AG (CS) and JPMorgan Chase & Co. (JPM).
Following the announcement, Fortescue emerged strongly from a trading halt put in place on Friday, with shares soaring nearly 18 percent to A$3.52 in Tuesday's regular trading on the ASX.
"Fortescue took decisive action to secure a facility that underwrites our liquidity and maximizes flexibility. This action, together with our previously announced measures, will continue to build on Fortescue's profitability, liquidity and above all, removes uncertainty around our financing arrangements," Fortescue CEO Nev Power said in a statement.
Australia's third-largest and world's fourth-largest iron ore producer noted that the credit facility will extend its earliest repayment date for any of the company's debt by three years to November 2015. It will also remove all financial maintenance covenants which applied under previous facilities.
The company has been hit by the slump in iron ore prices due to the shrinkage in demand from China. The company added, "Fortescue has moved quickly to ensure its capital structure can withstand prolonged market volatility." The new facility will give the company enough time to cope up with its $9 billion in debts.
Earlier, the company was evaluating offers from firms that were interested in partnering it in certain assets. Meanwhile, it was not under any pressure to sell assets or stakes. However, the new debt facility does not warrant any deals of such nature, the company noted.
"These new measures, together with additional operating cashflow generated from near-term volume increases at Christmas Creek and low cost tonnes from Solomon, will place Fortescue in a strengthened position toward our long-term production goals," Power added.
Early last month, Fortescue secured $1.50 billion in new funding for the expansion of its flagship iron ore operations in Western Australia's Pilbara region. Bank of Merrill Lynch is the underwriter and arranger for the facility.
The dual-tranche facility, maturing on December 31, 2013, comprises a term loan of $750 million and a revolving credit facility of $750 million.
FSUMF closed Monday's trading at $3.16, down $0.06 or 1.99% on a volume of 31,969 shares.
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