To get the latest deal away it not only had to offer a significantly higher coupon on the bonds it was forced to secure the debt against the company’s assets.
That rang warning bells at the credit ratings agency Standard & Poor’s which lowered its credit rating on FMG’s senior secured debt.
“Following this transaction, the company’s secured debt will increase to $US7.2 billion from $US4.9 billion,” S&P said.
“The refinancing will not change the quantum of the company’s debt. However, we consider that the increased proportion of secured debt is likely to materially reduce the recovery prospects for existing secured and unsecured debt providers.”
From the AFR:
I hope all of those folk piling into FMG equity yesterday read this. With so many of the firm’s assets now securing the debt, these new bond holders are the real equity holders in FMG.
The only buyers that make sense at this juncture are strategic (though nonsense could also explain it, the Capital Group has been recklessly accumulating FMG equity).
If it is strategic buyers then they are very likely some part of China inc. Let’s hope not because if so it is game, set and match for iron ore indefinitely.
