Fortescue executes $881 million bond offer to repay debt

Fortescue Metals Group has completed a $US600 million ($881 million) bond offering that will be used to partially repay its $US1.4 billion 2022 loan facility.

The bond will be received at an interest rate of 4.5 per cent, which is set to mature in September 2027.

In addition, Fortescue is negotiating with existing lenders for the extension of term loan maturities of $US600 million to 2025.

The balance of the term loan of $US200 million will be repaid from operation cash.

Fortescue’s chief executive officer Elizabeth Gaines said the execution of the offering followed the company’s record financial results in 2019.

“Fortescue’s balance sheet is structured on investment grade terms which have allowed us to take advantage of market conditions to extend the maturity of Fortescue’s debt at a low cost,” Gaines said.

“In addition, we are in negotiations to extend the balance of the 2022 term loan while maintaining optionality and flexibility to ensure the long-term sustainability of our operations, invest in growth and development and continue to deliver returns to our shareholders.”

The 2022 loan facility which Fortescue announced last year exists alongside key Chinese, Australian and European financial institutions.

Proceeds of the $US1.4 billion loan are being used to redeem a portion of Fortescue’s 2022 senior secured notes, lowering annual borrowing costs by an expected $US80 million.

At the time of being announced, Fortescue said the agreement extended the company’s relationship with Chinese financers, which includes the funding arrangements for the company’s ore carriers.

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