Ferrexpo could raise up to USD 750 mln in new debt in near future

The shareholders of Poltava Iron Ore (PGOK UK), a subsidiary of iron ore miner and pellet maker Ferrexpo (FXPO LN, FXPOLN), have approved the issue of new bonds by related company Ferrexpo Finance Plc for an amount of up to USD 750 mln, and maturity of up to 10 years, with the coupon rate not exceeding 11%, Interfax Ukraine reported on Nov. 18. The decision involved a standard legal procedure that does not imply these bonds have been or will be actually issued, a Ferrexpo spokesperson told Concorde Capital.

Igor Zholonkivskyi: While there has been no official confirmation of ongoing negotiations with the underwriters regarding the possible issue of the new bonds, we believe that the shareholder decision is not a mere legal formality and that the possibility of Ferrexpo planning to refinance its existing debt with the new Eurobonds is rather high. 

In case this action does materialize, and the company manages to raise new debt on the outlined terms, we think this will definitely be positive for the holders of the company’s 2019 Eurobonds, which will then be repaid on time regardless of developments on the global iron ore markets.

However, as the recent iron ore rally seems to be running out of steam, and as iron ore pricing is possibly reverting to its original downward trend, Ferrexpo’s increasing indebtedness will probably put more pressure on its stock in the mid- to long-term perspective.