Shares of Fortescue Metals Group Limited (ASX: FMG) have rallied more than 11% this morning to $2.12 after the miner made a successful return to the bond market overnight. While it had planned to raise US$1.5 billion in debt, strong demand saw that amount upsized to US$2.3 billion on a yield of 9.75% per annum.
Given the drastic fall in commodity prices over the last 12 months, Fortescue has been eager to raise debt at an attractive rate in order to extend its debt maturity profile. As of 31 March 2015, the miner was in a net debt position of US$7.4 billion, with a large portion of that falling due between 2017 and 2019.
However, the figure raised today will result in the full repayment of its 2017 and 2018 Senior Unsecured Notes, US$450 million will be paid off its 2019 debt and an additional US$350 million will further strengthen its balance sheet. You can see the effects of the debt raising in the figure below:
Source: Fortescue Metals Group
The successful offer comes after Fortescue failed to raise cash from investors in March. It was forced to scrap its US$2.5 billion offer as investors were demanding a much higher yield than what it was willing to offer given the plummeting iron ore price and high debt profile.
The miner will now have to pay an even higher yield than what it was reportedly refusing to pay last month, offering a 9.75% yield per annum on the bonds which have a term of seven years with a non-call period of three-years.
A strong rise in iron ore prices overnight is also generating plenty of energy for Australia's iron ore miners. The commodity surged 5.9% – its biggest one-day jump since October 2012 – which has seen BC Iron Limited (ASX: BCI) and Arrium Ltd (ASX: ARI) jump 29% and 9.7% respectively.
