There have been a few comments about the debt at FMG not being a problem as it is all subordinated, and only repaid out of sales. There have also been debt figures of A$5.9Bn bandied about.
Figures are at June 30 2008.
There is a sub-ordinated loan note with a value calculated by FMG of $6.3Bn. This is based on a $100M Loan Note which has interest paid as to 4% of revenue, net of royalties, from the sale of iron ore FOB Pt Hedland from Cloudbreak and Christmas Creek. FMG valued the note upwards to $6.3BN based on forecast production expectations, including production increases to 160M tpa from the two mines during the term of the note, as well as future io prices and exchange rates – the $6.3Bn representing a forecast of funds to be paid under this note. I assume that will be significantly revalued at June 30 09, and perhaps even at Dec 31 2008.
Then there is US$1.65M in US dollar denominated interest bearing notes, and EUR315M in Euro denominated notes. This is at today’s exchange rates ~ A$3.06Bn of debt – though not taking into account any note purchases that may have taken place.
Of interest is that the interest rates appear to be fixed on this debt at varying rates between 10.625% and 9.75%, with a portion floating at LIBOR + 4%. Hindsight is an easy things, but these fixed rates are not attractive.
However the point is that yes, there is $6.3Bn of “debt” as at June 30 which purely relates to IO sales, including forecast increases, over a 13 year period and is not a debt worry for FMG. I would note that many posters have speculated about BHP wanting FMG – this would be another issue why they would not.
However there is also A$3.06Bn, with quarterly interest repayments at a high rate in the current market – and this is an issue.
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