From Bloomie:
Aug. 1 (Bloomberg) — Fortescue Metals Group Ltd.’s junk bonds climbed in July by the most this year, rebounding from their biggest two-month slump since 2011, as iron ore prices rose and the tumbling Australian dollar reduced costs.
Australia’s third-biggest iron-ore miner generated returns of 2.9 percent since June 30, leading the nation’s notes to the strongest gains on Bank of America Merrill Lynch’s U.S. High Yield Metals & Mining Index.
“The iron-ore price has held up a little better than people have expected over the last quarter,” said Chris Walter, a credit research analyst at Westpac Banking Corp. “Given their cash flow generating capabilities, and their scheduled cash outflows for this coming financial year, it’s actually a fairly positive credit story.”
Fortescue is benefiting from a rebound in commodity prices and as the Aussie dollar’s 12 percent slide over the past three months boosts profit margins. Along with cost-cutting measures, the currency’s decline helped the Perth-based company reduce outlays 17 percent during the June quarter from the previous period. Cash flow is expected to increase as Fortescue almost triples output capacity this year.
“They’ve got their capex under control, and that they should return to free cash flow generation this coming financial year has everyone realizing there aren’t any short-term debt maturity pressures,” Walter said.
FMG really enjoying the calm before the storm!
