Fortescue Metals Group will pursue assets sales and potentially take on minority investors in operating mines, despite the debt relief deal that sent the miner’s shares soaring 17 per cent yesterday.
Today, the rush slowed with FMG up 4.7 per cent, 16.5 cents, to $3.665 at 10.00am.
The $US4.5 billion ($4.3 billion) syndicated credit line, underwritten by Credit Suisse and JP Morgan, would pay off $US2.1 billion of bank debt — including the $US1.5 billion credit line extended to Fortescue last month by Merrill Lynch Bank of America — and $US1.5 billion in other borrowings.
That would leave about $US900 million available for drawdown if cash flow issues caused by volatile iron ore prices persisted, Fortescue executives said yesterday.
Chief financial officer Stephen Pearce said that while Fortescue had increased its potential total debt, and would still be required to make interest payments on its loans, the new facility meant the first repayment of debt principal was not due until November 2015.
Fortescue’s maximum debt drawdown would be as much as $US10.1 billion, Mr Pearce said, peaking in the second quarter of next year.
Chief executive Nev Power said its new lenders had not demanded asset sales but the miner remained in talks with potential buyers of mine infrastructure such as power stations, accommodation camps and water treatment facilities.
Mr Power said the new debt deal had “comprehensively” dealt with Fortescue’s liquidity issues, and there would be no fire sale.
“This means that any asset sales — non-core or participating interest — will be dependent on us being able to get real long-term value that reflects the quality of our assets,” he said.
Analysts had cast doubt on whether the sale of power stations or rail lines would benefit Fortescue in the long term, saying it would push up operating costs.
But Mr Power said he was confident the reverse was the case.
“The people that we are talking to are first-class operators, and in most of those assets anyway we don’t operate them ourselves but they are contracted out to others.
"So in fact it will be a matter of looking for economies of scale and efficiencies from those larger or more specialist operators,” he said.
There were no negotiations but Mr Power confirmed Fortescue would consider taking on minority partners in future mine developments, – including its Nyidinghu and Western Hub projects - and in its operating mines and transport infrastructure.
Fortescue soared 51¢ to $3.50.