FMG share price: Where next following $1.5 billion debt offering?
The FMG share price has drifted lower after announcing a blockbuster bond offering last week.
Iron ore heavyweight – Fortescue Metals Group (FMG) – last Thursday announced it was launching a US$750 million bond offering.
On Friday the miner revealed that it had not only successfully completed that offering, but due to strong demand, it had been upsized to US$1,500 million.
The senior unsecured notes under the offering will come due in April 2031 and carry an interest rate of 4.375%.
Unsecured notes are generally considered riskier – ergo the higher interest rate – as they are not backed by a company’s assets.
FMG said it would use the funds from the offering to repay its US$750 million 2022 Senior Unsecured Notes, as well as for general corporate purposes.
Speaking of this news, FMG’s Chief Executive Officer, Elizabeth Gaines said:
'Fortescue continues to deliver outstanding operational and financial performance which underpins our ongoing support from the US Debt Capital Markets. Our balance sheet is structured on low cost, investment grade terms, maintaining flexibility to support ongoing operations and the capacity to fund future growth.'
'Our disciplined capital allocation framework provides for investment in future opportunities and the continued delivery of value to our investors,’ Elizabeth Gaines added.
Since announcing the bond offering last Thursday, the FMG share price has drifted lower, last trading at $19.70 per share, down 3.70% as of 10:55 AM on Monday, March 22.
Iron ore prices remain at multi-year highs, though IG’s Iron Ore instrument was down 2.98% at the time of writing.
Where next: Macquarie stays bullish
Analysts from Macquarie restated their bullish view on FMG in the wake of the bond offering announcement, reiterating their Outperform rating while keeping their 12-month price target of $25.50 per share unchanged.
‘The lengthening of the debt profile has pushed out the next debt repayment to early 2023. The upscaled facility will also provide FMG additional flexibility to manage the remaining capital spend at Iron Bridge while maintaining its commitment to sustaining an 80% earnings payout ratio for its dividend.’
Looking at some of the investment bank’s key forecasts, the current expectation is for FMG's total revenue to peak at US$18,308 billion in FY21, before declining thereafter. On the bottom-line, in fiscal 2021 FMG is forecast to report earnings (EBITDA) of US$12,856 million and profits (NPAT) of US$7,893 million.
Fortescue’s dividend, which has become increasingly watched by the market, is also expected to dramatically increase this financial year. In FY21 Macquarie expects the miner to pay out some US$5,480 million worth of dividends – equal to AUD$277 cents per share or a dividend yield of 13.7%.
Trade stocks like FMG and Rio Tinto – long and short – with IG today
Create an IG account or log in to your existing account to get started now.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
Live prices on most popular markets