In a strategic move that underscores its ambitious growth plans, Cleveland-Cliffs Inc. has successfully reconfigured its financial landscape, paving the way for a transformative acquisition. The Cleveland-based iron mining and steelmaking giant has announced a significant amendment to its $4.75 billion asset-based lending facility, a crucial step in its journey to acquire Stelco Holdings, a prominent Canadian steel company.
The acquisition, first announced in July, assigns a total enterprise value of approximately $2.5 billion to Stelco Holdings Inc. This bold move by Cleveland-Cliffs signals its intent to expand its footprint in North America and solidify its position as a leading player in the steel industry. The deal, expected to close in the fourth quarter of 2024, represents a significant milestone in the company's growth strategy and its vision for the future of steelmaking in the region.
As part of this financial restructuring, Cleveland-Cliffs has completely replaced Goldman Sachs' participation in its ABL facility. In its place, the company has secured increased commitments from a roster of major financial institutions, including Bank of America, Wells Fargo, J.P. Morgan, Fifth Third, Truist, Capital One, BMO, Huntington, and U.S. Bank. This shift in banking partnerships demonstrates Cleveland-Cliffs' ability to attract strong financial backing and its strategic approach to aligning with institutions that share its long-term vision.
Furthermore, the company has maintained existing commitments from a diverse group of banks, including PNC, Flagstar, UBS, MUFG, Regions, Barclays, ING, RBC, and First Citizens. This broad base of financial support underscores the confidence that the banking sector has in Cleveland-Cliffs' business model and growth prospects. The diversity of this banking group also provides the company with a robust financial foundation to support its expansion plans.
Lourenco Goncalves, President and CEO of Cleveland-Cliffs, highlighted the overwhelming response to the company's capital request, noting that it was three times over-subscribed. This strong show of support from banking partners not only reinforces Cleveland-Cliffs' financial position but also validates its strategic direction. Goncalves emphasized the importance of partnering with institutions that share the company's strategic priorities, a key factor in positioning Cleveland-Cliffs for further growth across the United States and Canada.
The amended ABL facility, which now matures in 2028, provides Cleveland-Cliffs with enhanced financial flexibility and a longer runway to execute its growth strategies. Importantly, as of the finalization of the ABL amendment, the company reported no net borrowings on its ABL facility. This clean slate positions Cleveland-Cliffs favorably as it prepares to close the Stelco transaction, allowing for a quick and efficient acquisition process.
