Cleveland-Cliffs Inc. (NYSE: CLF) (“Cliffs”) announced today
that it has priced $725 million aggregate principal amount of
Senior Secured Notes due 2026 (the “Notes”) in an offering (the
“Notes Offering”) that is exempt from the registration requirements
of the Securities Act of 1933 (the “Securities Act”). The Notes
will bear interest at an annual rate of 6.75 percent and will be
issued at a price of 98.783 percent of their principal amount.
The Notes will be, following the closing of the Merger (as
defined below), guaranteed on a senior secured basis by Cliffs’
material wholly owned domestic subsidiaries, including AK Steel
Holding Corporation (“AK Holding”) and its material wholly owned
subsidiaries (subject in each case to certain exceptions and
permitted liens), and secured by (i) a first-priority lien on
substantially all of Cliffs’ assets and the assets of the
guarantors (other than accounts receivable and other rights to
payment, inventory, as-extracted collateral, investment property,
certain general intangibles and commercial tort claims, certain
mobile equipment, commodities accounts, deposit accounts,
securities accounts and other related assets and proceeds and
products of each of the foregoing (collectively, the “ABL
Collateral”)), and (ii) a second-priority lien on the ABL
Collateral, which is junior to a first-priority lien for the
benefit of the lenders under Cliffs senior secured asset-based
credit facility.
Although we expect that the Notes Offering will be consummated
concurrently with the consummation of the previously announced
merger (the "Merger") with AK Holding, in the event that the Notes
Offering is consummated before the consummation of the Merger, the
gross proceeds of the Notes Offering will be deposited into an
escrow account until the consummation of the Merger. In addition,
the Notes will be subject to a “special mandatory redemption” in
the event that (i) the Merger is not consummated on or prior to
June 30, 2020 or (ii) if on or prior to June 30, 2020, the Merger
Agreement (as defined below) has been terminated and is not
otherwise amended or replaced. If a special mandatory redemption
event occurs, Cliffs will redeem the Notes at the “special
mandatory redemption price” equal to the issue price of the Notes
plus the accrued yield (as defined in the Notes) and accrued and
unpaid interest, if any, to, but excluding, the redemption
date.
The Notes Offering is expected to close on March 13, 2020,
subject to customary closing conditions.
Cliffs intends to use the net proceeds from the Notes Offering,
along with borrowings under Cliffs’ new asset-based revolving
credit facility (the “ABL Facility”) and cash on hand, to
repurchase, in the previously announced tender offers (“Tender
Offers”) for any and all outstanding 7.625% senior notes due 2021
(the “AK Steel 2021 Notes”) and 7.50% Senior Secured Notes due 2023
(the “AK Steel 2023 Notes”) issued by AK Steel Corporation, all AK
Steel 2021 Notes and AK Steel 2023 Notes that are validly tendered
and not validly withdrawn. To the extent any AK Steel 2021 Notes
and AK Steel 2023 Notes remain outstanding after expiration of the
Tender Offers, Cliffs intends to use the net proceeds from the
Notes Offering to redeem any and all such outstanding AK Steel 2021
Notes and AK Steel 2023 Notes, although it has no legal obligation
to do so and the selection of any particular redemption date
(subject to the requirements of the respective indentures governing
such notes, as may be modified by the consent solicitations being
conducted concurrently with the Tender Offers) is in its
discretion. Cliffs also intends to use any remaining net proceeds
from the Notes Offering to pay for fees and expenses in connection
with the Merger and the Notes Offering, and for general corporate
purposes.
This news release does not constitute an offer to sell or the
solicitation of an offer to buy any securities. The Notes and
related guarantees are being offered only to qualified
institutional buyers in reliance on the exemption from registration
set forth in Rule 144A under the Securities Act, and outside the
United States, to non-U.S. persons in reliance on the exemption
from registration set forth in Regulation S under the Securities
Act. The Notes and the related guarantees have not been registered
under the Securities Act, or the securities laws of any state or
other jurisdiction, and may not be offered or sold in the United
States without registration or an applicable exemption from the
Securities Act and applicable state securities or blue sky laws and
foreign securities laws.
About Cleveland-Cliffs
Founded in 1847,
Cleveland-Cliffs is the largest and oldest independent iron ore
mining company in the United States. Cleveland-Cliffs is a major
supplier of iron ore pellets to the North American steel industry
from its mines and pellet plants located in Michigan and Minnesota.
In 2020, Cleveland-Cliffs expects to be the sole producer of hot
briquetted iron (HBI) in the Great Lakes region with the
development of its first production plant in Toledo, Ohio. On
December 2, 2019, Cleveland-Cliffs agreed to acquire AK Holding, a
leading North American producer of sophisticated steel products,
which is expected to close in the first quarter of 2020. Driven by
the core values of safety, social, environmental and capital
stewardship, Cleveland-Cliffs’ employees endeavor to provide all
stakeholders with operating and financial transparency.
Forward-looking Statements
This communication contains certain forward-looking statements
within the meaning of the federal securities laws, including
Section 27A of the Securities Act of 1933, as amended, Section 21E
of the Securities Exchange Act of 1934, as amended, and the safe
harbor provisions of the Private Securities Litigation Reform Act
of 1995. When used in this communication, words such as
“anticipate,” “assume,” “believe,” “build,” “continue,” “create,”
“design,” “estimate,” “expect,” “focus,” “forecast,” “future,”
“goal,” “guidance,” “imply,” “intend,” “look,” “objective,”
“opportunity,” “outlook,” “plan,” “position,” “potential,”
“predict,” “project,” “prospective,” “pursue,” “seek,” “strategy,”
“target,” “work,” “could,” “may,” “should,” “would,” “will” or the
negative of such terms or other variations thereof and words and
terms of similar substance may identify forward-looking statements,
including statements with respect to the businesses, strategies and
plans of AK Holding and Cliffs, their expectations relating to the
Merger, including the expected benefits of the proposed Merger and
the anticipated completion of the proposed Merger or the timing
thereof, and their respective future financial condition and
performance and expectations, estimates and projections about
Cliffs’ or AK Holding’s respective industries or businesses. Cliffs
and AK Holding caution investors that any forward-looking
statements are subject to risks and uncertainties that may cause
actual results and future trends to differ materially from those
matters expressed in or implied by such forward-looking statements.
Investors are cautioned not to place undue reliance on
forward-looking statements. Among the risks and uncertainties that
could cause actual results to differ from those described in
forward-looking statements are the following: the risk that the
Agreement and Plan of Merger between Cliffs, AK Holding and Pepper
Merger Sub Inc., a direct wholly owned subsidiary of Cliffs,
entered on December 2, 2019 (the “Merger Agreement”) may be
terminated in accordance with its terms and that the Merger may not
be completed; the possibility that Cliffs shareholders may not
approve the Merger Agreement and the transactions contemplated by
the Merger Agreement, including the issuance of Cliffs common
shares in connection with the Merger; the possibility that AK
Holding stockholders may not adopt the Merger Agreement; the risk
that the parties may not be able to satisfy any or all of the
conditions to the completion of the Merger in a timely manner or at
all; the risk that the Merger may be less accretive than expected,
or may be dilutive, to Cliffs’ earnings per share, which may
negatively affect the market price of Cliffs common shares; the
possibility that Cliffs and AK Holding will incur significant
transaction and other costs in connection with the Merger, which
may be in excess of those anticipated by Cliffs or AK Holding; the
risk that the financing transactions to be undertaken in connection
with the Merger have a negative impact on the combined company’s
credit profile or financial condition; the risk that Cliffs may
fail to realize the benefits expected from the Merger; the risk
that the combined company may be unable to achieve anticipated
synergies or that it may take longer than expected to achieve those
synergies; the risk that any announcements relating to, or the
completion of, the Merger could have adverse effects on the market
price of Cliffs common shares; the risk related to any unforeseen
liability and future capital expenditure of AK Holding or Cliffs;
the risk that pending litigation relating to the Merger and any
potential future litigation against Cliffs, AK Holding or their
respective directors may delay or prevent the completion of the
Merger; the risks related to Cliffs’ ability to issue new senior
notes or obtain a new revolving credit facility in connection with
the Merger on favorable terms, if at all; the risk that the Merger
and its announcement or completion could have an adverse effect on
the ability of Cliffs and AK Holding to retain customers, retain
and hire key personnel and/or maintain relationships with their
suppliers and business partners; and the risk of any changes in
general economic, market or business conditions, or changes in the
economic or financial condition of Cliffs and AK Holding. Other
risks to Cliffs and AK Holding and factors that may present
significant additional obstacles to the realization of
forward-looking statements or that could have a material adverse
effect on Cliffs’ and AK Holding’s respective financial condition,
operating results, credit rating, liquidity and businesses
generally are described under the caption “Risk Factors” in Cliffs’
and AK Holding’s respective Annual Reports on Form 10-K for the
year ended December 31, 2019 and other periodic reports filed with
the Securities and Exchange Commission (the “SEC”) as well as in
the Registration Statement (as defined below).
Unless expressly stated otherwise, forward-looking statements
are based on the expectations and beliefs of the respective
management teams of Cliffs and AK Holding based on information
currently available. Forward-looking statements are subject to
inherent risks and uncertainties and are based on assumptions and
estimates that are inherently affected by the respective operations
and business environments of Cliffs and AK Holding, including
economic, competitive, regulatory and operational risks, many of
which are beyond the control of Cliffs and AK Holding and which are
difficult to predict and may turn out to be wrong. The foregoing
list of factors should not be construed to be exhaustive. There is
no assurance that the actions, events or results of the
forward-looking statements will occur, or, if any of them do, when
they will occur or what effect they will have on the results of
operations, financial condition or cash flows of Cliffs or AK
Holding. In view of these uncertainties, Cliffs and AK Holding
caution that investors should not place undue reliance on any
forward-looking statements. Further, any forward-looking statement
speaks only as of the date on which it is made, and, except as
required by law, Cliffs and AK Holding undertake no obligation to
update or revise any forward-looking statement to reflect events or
circumstances after the date on which it is made or to reflect the
occurrence of anticipated or unanticipated events or
circumstances.
Additional Information and Where to Find
It
In connection with the proposed Merger, Cliffs filed with the
SEC a registration statement on Form S-4 (File No. 333-235855) (as
amended and as it may be supplemented from time to time, the
“Registration Statement”) that was declared effective by the SEC on
February 4, 2020 and that includes a joint proxy statement of
Cliffs and AK Holding and also constitutes a prospectus of Cliffs.
On February 4, 2020, AK Holding filed with the SEC its definitive
joint proxy statement/prospectus in connection with the proposed
Merger. Cliffs and AK Holding may also file other documents with
the SEC regarding the proposed Merger. This communication is not a
substitute for the Registration Statement or any other such
document that Cliffs or AK Holding may file with the SEC. INVESTORS
AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT,
THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS AND ANY OTHER
RELEVANT DOCUMENTS THAT ARE FILED OR WILL BE FILED WITH THE SEC, AS
WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY
AND IN THEIR ENTIRETY BECAUSE THEY CONTAIN OR WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION AND RELATED
MATTERS. Cliffs and AK Holding began mailing the definitive joint
proxy statement/prospectus to the shareholders of Cliffs and
stockholders of AK Holding, respectively, on or about February 5,
2020. Investors and security holders may obtain copies of the
Registration Statement, the definitive joint proxy
statement/prospectus and the other documents filed with the SEC
free of charge at the SEC’s website, www.sec.gov. Documents filed
with the SEC by Cliffs are also available from Cliffs free of
charge at its website, www.clevelandcliffs.com, or by contacting
Cliffs’ Investor Relations at 216.694.6544. Documents filed with
the SEC by AK Holding are also available from AK Holding free of
charge at its website, www.aksteel.com, or by contacting AK
Holding’s Investor Relations at 513.425.5215.
Participants in the Solicitation Regarding
the Proposed Merger
Cliffs and AK Holding and certain of their respective directors
and executive officers may be deemed to be participants in the
solicitation of proxies in respect of the proposed Merger.
Information regarding Cliffs’ directors and officers, including a
description of their direct or indirect interests, by security
holdings or otherwise, is set forth in the proxy statement for
Cliffs’ 2019 annual meeting of shareholders, as filed with the SEC
on Schedule 14A on March 12, 2019. Information concerning AK
Holding’s directors and executive officers, including a description
of their direct or indirect interests, by security holdings or
otherwise, is set forth in the proxy statement for AK Holding’s
2019 annual meeting of stockholders, as filed with the SEC on
Schedule 14A on April 10, 2019. Additional information regarding
the interests of these participants are included in the definitive
joint proxy statement/prospectus and the Registration Statement, as
well as other relevant materials filed with the SEC when such
materials become available. Free copies of these documents may be
obtained from the sources indicated above.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200302005939/en/
MEDIA CONTACT: Patricia Persico Director, Corporate
Communications (216) 694-5316
INVESTOR CONTACT: Paul Finan Director, Investor Relations
(216) 694-6544
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