Sirius Minerals PLC has announced changes to its financing and development plan and a review of the various strategic options available to the company, after also announcing it does not believe its proposed US$500 million secured bond offering — which it shelved last month — can be issued "in the current market conditions."
By 10:15 a.m. BST on Sept. 17, the firm's share price was down 45% on the session at 550 pence, having been up at nearly 3,000 pence a year ago.
The scope of construction activities on the company's North Yorkshire Polyhalite Project will now be adjusted while a strategic review is undertaken over a period of up to six months. The company adds that at the end of last month, it had unrestricted cash reserves of £180 million, which it says provides sufficient liquidity for it to explore all strategic options during the review.
Meanwhile, proceeds from the US$400 million of convertible bonds due 2027 — which were held in escrow following issuance in May 2019 — will be returned to investors.
The successful issuance of the secured bonds was integral to it delivering its Stage 2 financing plan, which includes unlocking the US$2.5 billion revolving credit facility, for which commitments were due on June 4. Consequently, the company will reduce the rate of development across the project in order to preserve funding and allow the six-month review to take place.
The company adds that since shelving its proposed bond issue on Aug. 6, it "is not aware that any significant new issuer in the same B/B- credit range ... has come to market." Sirius, meanwhile, had been marketing its US$500 million offering of 7.5-year secured notes with IPTs of 13.5% area.
At the time, that would have made the deal the second-highest-yielding dollar bond this year, though the highest — from Neiman Marcus — is rated CCC–/Ca.
Market sources, though, also point to debut issuer Forgital, which raised US$505 million of seven-year secured notes at 7.375% on Aug 2. It is a debut borrower, and its products are used in industries such as aerospace, oil and gas, construction, mining and power generation.
That said, market conditions did weaken noticeably in the few days following Forgital's new issue, with secondary bonds softening 1-3 points across the board in early August — thereby extending a slide prompted by escalating trade tensions — but whether market conditions are still soft is debatable, according to sources, who also point to an excess of 30 bonds to have priced this month in the U.S. already that includes some triple-C rated supply and a decent array of single-B issuance. The European market, which the bonds were also being marketed in, is more bifurcated, and while there has been a surge of supply this month it has all been for double-Bs or high-quality single-Bs. And while the iTraxx Crossover widened nearly 20 basis points to 293 between Aug. 8-14, it has since tightened to 243.
Rather, as IPTs suggest, it seems this deal was not proving an easy sell, with numerous accounts commenting it was essentially a high-risk project-finance deal to create a chemical that is so far commercially unproven, while there were also plenty of grumbles about financing a project that is both complex and uncertain. However, those who were more constructive on the deal noted that, should the plant be completed on time and to budget, there is potential that polyhalite would prove highly profitable.
The company is constructing a mine located in North Yorkshire to commercialize what is believed to be the world's largest high-grade polyhalite deposit, with annual production capacity of 13 million tonnes per annum.
As the mine development continues, construction costs were to be funded through RCF drawdowns, and over time the drawn portions of the RCF were to be refinanced via capital markets issuance at various intervals.
This analysis was written by Luke Millar, the European managing editor for LCD, an offering of S&P Global Market Intelligence.
