In one of the interesting contrasts of the week, Fortescue Metals reported only a small fall in its annual profit result a day after BHP reported its massive 54% decline in earnings. The iron ore price has been smoked in the past 12 months and Fortescue, with a mountain of debt, needed to be agile in managing its exposures.
And agile it was as it reported an earnings decline of only 3.6%, from USD$331 million to USD$319 million. The result was helped by a USD$192 million gain made by Fortescue in taking advantage of a slump in the price of its own debt and buying its bonds back at a large discount to face value.
Back in November YieldReport reported how Fortescue bought back around USD$750 million worth of bonds (face value terms) at an average price of 83.5 cents in the dollar after a massive rout in commodity prices put pressure on the credit ratings and share prices of mining stocks. This was after buying some debt back in September at around 80 cents in the dollar. Fortescue has also managed to push out the maturity date of some of its debt giving its some breathing room as the commodities rout shows no signs of being over.
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