Company Update (NYSE:CLF): Cliffs Natural Resources Inc Announces Exchange Offers for Senior Notes

Cliffs Natural Resources Inc (NYSE:CLF) announced the commencement of private offers to exchange up to $710 million aggregate principal amount of its newly issued 8.00% 1.5 Lien Senior Secured Notes due 2020 (the “New 1.5 Lien Notes”) for certain outstanding notes of Cliffs, upon the terms and subject to the conditions set forth in the Company’s offering memorandum dated January 27, 2016.

The following table sets forth each series of outstanding senior unsecured and secured notes subject to the exchange offers (the “Existing Notes”) and indicates the applicable consideration offered for such series in the exchange offers for the Existing Notes (the “Exchange Offers”).

Principal Amount of New 1.5 Lien Notes(1)

Title of Series/CUSIP Number
of Existing Notes

Maturity Date

Aggregate Principal
Amount Outstanding

Exchange Consideration

Early Tender

Total Exchange

3.95% Senior Notes due 2018
/18683K AF8*

January 15,





5.90% Senior Notes due 2020

/18683K AA9

March 15,





7.75% Second Lien Notes due
2020 /18683K AG6/

March 31, 2020





4.80% Senior Notes due 2020

/18683K AB7

October 1, 2020





4.875% Senior Notes due 2021
/18683K AD3

April 1, 2021





6.25% Senior Notes due 2040
/18683K AC5

October 1, 2040





(1)  For each $1,000 principal amount of Existing Notes.

(2)  Includes Early Tender Premium

*     The interest rate payable on our 3.95% Senior Notes due 2018 is subject to adjustment in the event of a change in the credit
ratings and is currently at the maximum interest rate of 5.95% per annum.

Eligible holders must validly tender their Existing Notes at or prior to 5:00 p.m., New York City time, on February 9, 2016 (the “Early Tender Date”), in order to be eligible to receive the applicable “Total Exchange Consideration” shown in the table above, which includes the “Early Tender Premium”. Existing Notes tendered after the Early Tender Date but prior to expiration of the Exchange Offers will be eligible to receive only the applicable “Exchange Consideration”.

The Exchange Offers will expire at 5:00 p.m., New York City time, on February 26, 2016 (the “Expiration Date”). Tenders of Existing Notes may not be withdrawn after 5:00 p.m., New York City time, on February 9, 2016, except in certain limited circumstances described in the offering memorandum and related letter of transmittal.

Eligible holders of Existing Notes accepted for exchange in the Exchange Offers will also receive a cash payment equal to the accrued and unpaid interest in respect of such Existing Notes from the applicable most recent interest payment date to, but not including, the settlement date of the Exchange Offers. Interest on the New 1.5 Lien Notes will accrue from such settlement date, which will occur promptly after the Expiration Date.

The New 1.5 Lien Notes will be unconditionally and irrevocably guaranteed by subsidiaries which directly or indirectly own substantially all of our domestic assets. The Existing Notes, other than the 7.75% Second Lien Notes due 2020 (the “Second Lien Notes”), are unsecured and are not guaranteed by any subsidiaries. The New 1.5 Lien Notes will be secured by (1) junior first priority liens on substantially all of our assets and the assets of the subsidiary guarantors, except for the “ABL Collateral,” which consists of accounts receivable, inventory and other assets securing our asset-based lending facility (the “ABL Facility”), and (2) junior second priority liens on the ABL Collateral. Accordingly, any Existing Notes that remain outstanding after the Exchange Offers will be (1) other than the Second Lien Notes, structurally subordinated to the subsidiary guarantees of the New 1.5 Lien Notes and (2) effectively subordinated to the New 1.5 Lien Notes to the extent of the collateral for the New 1.5 Lien Notes.

The aggregate principal amount of New 1.5 Lien Notes to be issued in the Exchange Offers is limited to $710 million (the “Maximum Exchange Amount”). In the event that the Exchange Offers are oversubscribed, only an aggregate principal amount of Existing Notes that results in the issuance of New 1.5 Lien Notes not in excess of the Maximum Exchange Amount will be accepted for exchange.  Pursuant to this structure, validly tendered Existing Notes will be accepted for exchange on a pro rata basis for each tender in proportion to the aggregate principal amount of Existing Notes tendered in the Exchange Offers, with no series of Existing Notes having priority over any other series of Existing Notes to be exchanged pursuant to the Exchange Offers, provided that 3.95% Senior Notes due 2018 will be accepted for exchange before any other Existing Notes, and accordingly will not be subject to any proration.

The Exchange Offers are conditioned on the satisfaction or waiver of certain customary additional conditions, as described in the offering memorandum and related letter of transmittal. The Exchange Offers are not conditioned upon any minimum amount of Existing Notes being tendered. The Exchange Offers for the Existing Notes may be amended, extended or terminated, in each case either as a whole, or independently with respect to any one or more particular series of Existing Notes. (Original Source)

Shares of Cliffs Natural Resources closed yesterday at $1.52. CLF has a 1-year high of $7.96 and a 1-year low of $1.20. The stock’s 50-day moving average is $1.66 and its 200-day moving average is $2.63.

On the ratings front, Cliffs Natural Resources has been the subject of a number of recent research reports. In a report issued on January 8, Macquarie analyst Aldo Mazzaferro downgraded CLF to Hold, with a price target of $1.60, which implies an upside of 5.3% from current levels. Separately, on December 28, FBR’s Lucas Pipes reiterated a Hold rating on the stock and has a price target of $1.

According to, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Aldo Mazzaferro and Lucas Pipes have a total average return of -34.1% and -29.4% respectively. Mazzaferro has a success rate of 6.7% and is ranked #3503 out of 3607 analysts, while Pipes has a success rate of 18.5% and is ranked #3575.

Overall, 2 research analysts have rated the stock with a Sell rating, 2 research analysts have assigned a Hold rating and . When considering if perhaps the stock is under or overvalued, the average price target is $2.00 which is 31.6% above where the stock closed yesterday.

Cliffs Natural Resources Inc is a mining and natural resources company. The Company is a supplier of iron ore pellets to the North American steel industry from its mines and pellet plants located in Michigan and Minnesota.


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