Fortescue Metals Group announced that lead arrangers Credit Suisse and JP Morgan acted successfully amended its senior secured credit facility.

In repricing the facility, the company has reduced the previous margin of 4.25% by 1.00% to 3.25%, and extended the maturity to June 30, 2019. The initial margin of 3.25% will decrease further as Fortescue reduces leverage through debt reduction.

Changes to the facility include:

  • The current Margin of 4.25% has been initially reduced to 3.25%. This 1.00% reduction represents an annual interest saving of approximately $50 million per annum.
  • Six months after the closing of the Facility the Margin will be subject to a Leverage Ratio calculation. A reduction in Fortescue’s current leverage levels will result in a further reduction in the margin.
  • If Fortescue achieves a Leverage Ratio of 2.5 times or less, the Margin will reduce by a further 0.50% to 2.75%. This would represent a total saving of 1.50%.
  • The maturity date has been extended by 21 months to June 30, 2019.

    • The repricing of the Facility will not increase Fortescue’s debt position, and Fortescue retains the ability to make early voluntary repayments of the facility at the company’s option. Terms and conditions of the Facility remain consistent with the company’s unsecured
    notes and do not contain financial maintenance covenants.

    Fortescue CEO Nev Power said he was pleased with the support of U.S. capital markets and the great work achieved in Perth and New York by the combined Fortescue, Credit Suisse and JP Morgan teams. “The result again demonstrates the market’s confidence in our strategy of ramping up production and then progressively repaying the debt that has funded our expansion,” Power said.

    Fortescue CFO Stephen Pearce said, “Fortescue has again received exceptionally strong support from the US debt capital markets. The amended terms of the Facility reflect Fortescue’s improving credit profile, with the ability to realize further savings in interest costs as leverage decreases through debt reduction and increased earnings. In the past 12 months Fortescue has consolidated its operational position, reduced production costs and continued to ramp up production as the
    155Mtpa expansion nears completion. With stable iron ore market conditions and the commitment to actively reduce debt in advance of formal maturity, the company is in a very strong financial position.”