Fortescue Cuts Junk-Rated Debt by a Further $1.6 Billion

Fortescue Metals Group Ltd. (FMG), the Australian miner that’s looking to boost its credit rating to investment grade, will pay down a further $1.6 billion of bonds following early repayments in late 2013.

The nation’s third-biggest iron ore miner confirmed plans to redeem $1.04 billion of unsecured notes due November 2015, having previously repaid $1 billion of the bond, according to a regulatory filing. It will also repay $600 million of securities due in February 2016.

Fortescue is seeking to cut its liabilities as it boosts production and global iron ore prices remain buoyant. Gross debt will fall to $9.6 billion from a peak of $12.7 billion, with net debt expected to be about $7.8 billion by the end of March, the company said. Moody’s Investors Service raised its rating on the miner to Ba1 from Ba2 today, citing “progress” in reducing obligations.

“The substantial increase in production and strong market conditions have strengthened our balance sheet and enabled us to accelerate our debt reduction program,” said Fortescue Chief Executive Officer Nev Power in the statement.

The company’s dollar-denominated bonds due in February 2016 were little changed at 103.2 cents on the dollar today, near the highest since May. Shares in the miner rose 3.5 percent to A$5.33 in Sydney, the biggest increase since Nov. 6.

In addition to the 2015 and 2016 bond repayments, Fortescue has also paid back A$140 million ($125 million) of preference shares and repriced a $4.95 billion loan. The steps undertaken by Fortescue to repay $3.07 billion of debt early and lower other debt costs will save the company more than $300 million in interest payments, Chief Financial Officer Stephen Pearce said in today’s statement.

To contact the reporter on this story: Benjamin Purvis in Sydney at

To contact the editor responsible for this story: Katrina Nicholas at

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