Baffinland Iron Mines restructures $350 million notes offering, tightens covenants

By Paul A. Harris

Portland, Ore., Dec. 21 – In an otherwise dead quiet pre-holiday primary market, Baffinland Iron Mines Corp. announced structural and covenant changes to its $350 million offering of five-year senior secured notes (Caa1/B-), according to an informed source.

Call protection on the notes is increased to four years from two years.

There are also covenant changes.

These include an increase in the consolidated coverage ratio for debt incurrence to 2.5 to 1 from 2 to 1.

The capital lease basket is reduced to $75 million and 4.5% of consolidated tangible assets, from $100 million and 6%, respectively.

The pari passu payment lien obligations debt limit is reduced to 33 1/3% from 50%.

A covenant was added restricting payments until a production level greater than or equal to 12 million tons per year is achieved in a four-quarter period for which financial statements are available.

A “Feasibility report and Phase 3 capital expenditures” covenant was also added.

There was no update to the timing or price talk of the deal, which began a roadshow on Dec. 9 and was silent through much of the intervening period.

Goldman Sachs & Co. is the left bookrunner for the Rule 144A for life and Regulation S offering. Morgan Stanley & Co. is the joint bookrunner.

The company plans to use the proceeds to pay off its senior secured credit facility, as well as for working capital and for other general corporate purposes.

The prospective issuer is the developer of an open pit iron mine in the Mary River area of Baffin Island, Nunavut, Canada.

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