Why the CIMIC (ASX:CIM) share price is lifting this morning

The CIMIC (ASX: CIM) share price is up this morning after the company announced a new performance bond facility.

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The Cimic Group Ltd (ASX: CIM) share price is up this morning after the company announced it had signed a new performance bond facility.

Shares in the ASX 200 construction, mining, and services company opened higher this morning and are currently trading up 1.32% at $18.

Let’s take a closer look at the news driving the CIMIC share price.

The importance of the bond facility

In today’s release, Cimic advised that its new $1.4 billion bond facility was a 3-year syndicated performance bond.

A performance bond is issued to one party in a contract as security against another party’s ability to perform. It offers an alternative to upfront guarantees for contract security and performance pledges. As it doesn’t always tie assets or cash as collateral, it can be a useful, flexible financing tool.  

As a large corporation operating in the mining and construction fields, CIMIC is a prime candidate for such bond facilities. The company is an engineering-led construction, mining, services and public-private partnerships corporation, which works across the lifecycle of assets, infrastructure and resources projects.

Commentary from management

CIMIC Group CEO Juan Santamaria said:

The facility reflects CIMIC’s strong financial position and supports our ability to meet the significant number of projects coming through the pipeline.

Access to bonding is an advantage for the group, ensuring we can provide our clients the required surety for our contractual obligations.

Cimic share price snapshot

The CIMIC share price has had a poor start to 2021, down 27.51% year to date. It has also fallen by 25.23% over the last 12 months.

The company has a market capitalisation of around $5.3 billion, with approximately 311 million shares outstanding. 

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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