Cleveland Cliffs 2025 Bonds Offer 6.5% Yield To Maturity

Cleveland Cliffs (CLF) shares have seen pressure as investors are hesitating to see the benefits of steel tariffs. Besides the tariffs, the company has closed on two senior note offerings and published its 10-K since I last wrote about the company's fixed income opportunity three months ago. While the 2020 bonds have eclipsed par, their return is still 5.5% to maturity. Further down the maturity timeline, the company's 2025 bonds are priced at 96 cents on the dollar, yielding 6.5% to maturity when combined with the note's 5.75% coupon. Despite the recent price improvements, investors can still get solid return from Cliffs' bonds.


Source: FINRA
Cliffs' financial performance improved markedly in 2017. Revenues improved by more than 10% to $2.33 billion. The company's gross profit also improved to over half a billion dollars, which was more than twice the 2015 amount. The company's operating income saw a similar improvement. The only downside to the Cliff's profit and loss was the $165 million charge related to a loss of restructuring debt.

Source: SEC 10-K
Cliffs' balance sheet saw some dramatic changes in 2017. The company's cash balance increased by nearly $700 million to over $1 billion. This was in part due to the new debt issuances, however, the total long-term debt increased by only $130 million to $2.3 billion. Ultimately, the company's equity deficit improved noticeably from $1.33 billion to $444... Read more

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