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Talk Business & Politics: Big River Steel closes on $800 million debt-equity financing package to expand scrap metal capacity
Big River Steel on Monday (June 3) announced it had closed on a debt-and-equity financing arrangement to expand its scrap metal recycling and flat-rolled steel production facility in Osceola, doubling current capacity to 3.3 million tons annually.
The $487 million debt financing package will go toward funding 30 years of Arkansas Department of Finance Authority-issued (ADFA) bonds, with the proceeds loaned to BRS for future expansion. The bonds, which are interest-only for the next 20 years, were priced at par with a coupon of 4.5% and traded in the when-issued market as high as 103 to yield 4.137%.
Another $290 million in equity financing was provided on a pro rata basis by Big River’s current ownership group, which includes a Koch family investment vehicle, a Goldman Sachs-led group, and the Arkansas Teacher Retirement System (ATRS). Big River officials said the bond and equity proceeds set the stage for an incremental downstream investment, which will allow the company to produce even higher grades of electrical steel as demand for hybrid and electric vehicles continues to ramp up.
“The level of interest shown by the bond investor community in supporting Big River Steel’s long-term growth is much appreciated and is a testament to the outstanding effort put forth by our employees in meeting the needs of our customers,” said Ari Levy, director of financing for the sprawling 1,300-acre industrial complex in Mississippi County.
“Our ability to quickly penetrate several of the most demanding steel markets, including directly selling to a number of the world’s leading automakers, was a significant factor leading to our success in issuing what we believe to be the longest maturity bonds in the North American steel industry,” Levy said.
In late 2018, Big River officials first revealed that the Arkansas steelmaker and its stakeholders were reviewing “strategic alternatives” and had fielded potential buyout offers. However, after a thorough two-month bidding and auction process, BRS decided to remain a standalone entity for the time being.
According to Talk Business & Politics sources, key auction-goers that showed interest in making potential bids for the company’s new Osceola mill were Charlotte, N.C.-based rival Nucor Corp., the nation’s largest steelmaker that is also expanding its sheet mill plant in Mississippi county. Fort Wayne, Ind.-based Steel Dynamics Inc., and a consortium of domestic and international steel producers and top Wall Street investment firms also showed interest.
BRS first broke aground on its $1.2 billion facility in September 2014. The company received $125 million in general obligation bonds under the state state’s Amendment 82 provision that allows for so-called “super projects.” It also received a $50 million loan, that was paid back 17 years early, and another $50 million for site preparation, according to the Arkansas Economic Development Commission.
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