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Fortescue Metals Launches $800 Million Bond Sale

To fund a mine expansion the Australian company Fortescue Metals Group Ltd is planning a $800 million bond sale. The money from the funds raised will be used for infrastructure expansions of the company's operations in the Pilbara region of Western Australia.

CEO Andrew Forrest had mentioned last month that the Fortescue Group would not mind tapping US capital sources. Perhaps that is why the company is offering senior secured seven-year bonds, callable in three years.

The bonds will be most likely priced today. The company also plans to meet some debt investors to market the notes for them. The expansion for the Pilbara region operations was approved last month and will help the company triple its output.

The senior unsecured notes will be rated as speculative by many of the key rating agencies. Moody’s Investors Service assigned the unsecured notes a provisional B1 rating. The B! Rating indicated that the investment would be highly speculative and below investment grade.

Another ratings agency Fitch has pegged them at a BB+ rating. While this is higher than the B1 rating from Moody it still indicates that the stock is highly speculative and may not be investment grade. The large debt needed to triple the production is what is setting alarm bells ringing with the investors.

Joel Scanlon

Written by

Joel Scanlon

Joel emigrated to Australia in 1995 and worked for five years in the mining industry as an exploration geotechnician, using GIS mapping and CAD software. Upon moving to the North Coast of NSW, Australia Joel worked as a graphic designer for a leading consultancy firm. After that, he ran a successful business providing web services to businesses along the eastern seaboard of Australia. During this time, he developed and launched News-Medical.Net. Joel has been working with AZoNetwork since the company was founded in 2000.

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