The Kangaroo In The Metals Mine: Fortescue Trying To Raise $1.5 Billion From 20 Banks As Iron Prices Implode

While last week's surprise announcement that GM was desperately seeking up to $5 billion in additional cash through a new revolver (meaning the administration's pride and bailed out joy, Government Motors, is once again burning far too much cash and that channel stuffing only pays in porn movies) took precisely nobody by surprise (at least not anyone who has been following our 2 year long series tracking AOL GM's dealer inventory warehousing habits), a far more sinister cash need has developed a very short time ago in a continent far, far away. Because while we have also noted the collapse in steel inventories and iron ore prices , which have recently imploded to 3 years lows as the Chinese hard landing, no longer maskable or avoidable, is finally sending shock waves around the world, as well as what these mean for a world that is sliding into a deep recession, promises by various impotent central bankers notwithstanding (see here, here and here), so far this wholesale collapse in the iron market had not translated into discrete events at the corporate level. Until now that is, because that second derivative of the "Chinese economic miracle", Australian hyper-levered iron ore miner, Fortescue, which is the fourth largest in the world, and is also the kangaroo in the iron ore mine for not only China, but Australia as well (and with a cornucopia of junk bonds in its balance sheet, a massively levered one at that) just telegraphed to the world that it is in desperate need of cash. According to Bloomberg, Fortescue Metals Group has approached about 20 banks as it markets a $1.5 billion loan in syndication, according to three people familiar with the matter.

And like that we are back to those days of 2008 when the Chinese demand collapse meant any day could be FMG's last. Happy days are back again.

More from Bloomberg:

  • A range of international banks, including Chinese and Japanese lenders, are considering joining the facility and are processing credit approvals, the people said, asking not to be identified because the details are private.
  • Bank of America agreed to solely underwrite, and syndicate, the debt earlier this month
  • Some banks decided not to pledge funds to the facility as it’s an unsecured loan, the people said
  • The loan is split equally into a term part and a revolving credit portion and matures in December 2013
    • Margin: 425bps over Libor 
    • Fee: 135bps fee for bank pledges of $150 million and above and title of mandated lead arranger and bookrunner. 100bps fee for bank pledges of $100 million to $149 million and title of mandated lead arranger
    • All-in rate: ~530bps
    • Information from people familiar with the matter, who asked not to be identified because the details are private

Details on the bank's existing credit facilities as well as its newly syndicated piece which crams down all those who are below it:

And, as usual, the bond market is the first to get the memo that the landing is going to be a hard one.

We give the farce that is known as equities about 4-6 weeks before they too get the memo.