Fortescue Metals Group Ltd has launched a US$750 million debt repayment offer for senior unsecured notes with maturities in 2019 and 2022 via a tender. The company has offered to purchase up to US$750 million (in face value terms) of the two series of notes via a modified Dutch auction.
The price range for the 8.25% 2019 series will be between 88% and 93% of face value while the 6.875% 2022 series will have a price range of 75% and 80%. Notes tendered before 24 November 2015 will receive a bonus 3 cents in the dollar in what seems to be a large inducement by Fortescue to get the deal done as quickly as possible.
The upcoming tender continues Fortescues recent practice of buying back debt. Fortescue repurchased USD$384m in the September quarter, although those purchases were made in the secondary market and not via an official tender. Fortescue said it had paid an average 80 cents in the dollar for that debt, with about 40% of the purchases made in the 2019 unsecured bonds and about a third in the 2022 secured bonds and the balance put towards the 2022 unsecured bonds. Prior to the September quarter purchases, there was another tender in March where bonds with maturities in 2017, 2018 and 2109 were purchased, mostly at prices close to par value and with a bonus 3% if tendered early.
Chief Executive Officer Nev Power said, “Accelerating Fortescue’s debt repayment programme through this tender will further reduce our interest costs while ensuring that we remain on track to achieve our initial gearing target of 40 percent.”