| * Fortescue faces no debt deadlines until 2019 * Cost cuts, ore price jump spurred bond demand - CFO (Adds CFO comments) By Mariana Santibanez and Sharon Klyne NEW YORK/SYDNEY, April 23 (Reuters) - Australian miner Fortescue Metals Group has refinanced $2.3 billion of its debt pile on a third attempt, but was forced to pay a higher yield amid investor concerns about the state of the iron ore market. Fortescue sold senior secured notes in New York at a 10.25 percent yield on Wednesday, a far richer price than the 8.5 percent the company offered just a month ago but which was pulled after it failed to tempt investors. "They should have priced when they could have issued at 9 percent," one leveraged finance banker told IFR, a Thomson Reuters publication. "Now they are out with a smaller deal at much wider levels." Fortescue, the world's fourth-largest iron ore miner, has come under pressure after it and other big producers ramped up output just as demand growth in China slowed, knocking prices down 60 percent since the start of last year. The price fall has pushed many smaller producers into the red, forcing some out of the market entirely, and raised concerns about Fortescue's ability to service its $9 billion in gross debt. Fortescue chief executive Nev Power said on Thursday the funds would be used to repay the company's 2017 and 2018 debt in full, refinance part of its 2019 debt and bolster its balance sheet. The decision to pay up to refinance, which Power described as a "great outcome", comes just a week after chief financial officer, Stephen Pearce, said the company was totally comfortable with its decision to scrap the March bond sale. Following the sale on Thursday, he said the timing was right now, after the company reported it had cut costs sharply, ensuring it was still profitable, and would slash costs further to achieve a breakeven price of $39 a tonne in 2016. It was also helped by a 4 percent jump in iron ore prices to $52.90 on Wednesday, after BHP Billiton put on hold plans to expand production to 290 million tonnes. "People were very pleased with the progress we've made on costs, very pleased with the guidance we were providing on the cost journey ahead of us and the certainty and clarity we provided," Pearce told Reuters. "And with a little bit of an uptick in the iron ore price, yesterday was the time to go back to the market." Sole lead manager JP Morgan launched the 9.75 percent $2.3 billion senior secured seven-year bond at a discount of 97.608 of par value to yield 10.25 percent - just a touch inside price talk of 10.5 percent, IFR reported. Fortescue also provided additional security to back the bond, including mining tenements, according to Fitch Ratings. Fitch has a BBB- rating on the bond, one notch higher than the company's BB+ rating due to the quality of the collateral. The company had to sweeten the terms and improve the security package, not least because Standard & Poor's on Wednesday cut its ratings a notch to BB from BB-plus and placed its outlook on negative, citing a deterioration in the firm's finances due to falling iron ore prices. Similarly Moody's downgraded Fortescue's rating to Ba2 from Ba1 last week and its unsecured rating to Ba3 to Ba2. By getting the bond away this third time round, Fortescue has won extra breathing room to ride out the low iron ore prices, with its first debt deadline now pushed out to 2019. Fortescue shares, which had tumbled about 65 percent over the past 12 months, jumped as much as 14 percent to A$2.18, a seven-week high. This time around, the company stuck to just a bond after last month cancelling plans for a $4.9 billion loan extension that ran alongside the initial bond offering. Credit Suisse led those failed deals with JP Morgan, but missed out on a role this time round. (Additional reporting by Sonali Paul in Melbourne and Cecile Lefort in Sydney; Editing by Jane Wardell and Richard Pullin)
|