First Quantum Minerals (FQM) has offered $2.2 billion worth of Senior Notes, including $1.1 billion 7.25% Senior Notes due 2023 and $1.1 billion 7.50% Senior Notes due 2025. The proceeds would be used to refinance the company’s existing Senior Notes due 2019 and 2020, fully repay (without cancelling) the company’s revolving debt, repay a portion of the company’s term debt, repay certain other senior debt and pay fees associated with the offering, with the remainder of the proceeds being used for general corporate purposes. As a result, FQM could cancel $233.0 million of the $350 million principal amount outstanding 7.25% Senior Notes due 2019, and $833.1 million of its $1.1 billion principal amount outstanding 6.75% Senior Notes due 2020. In February 2016, FQM warned investors that there was “significant doubt” that it could continue as a going concern, as it struggled to manage a massive debt load of almost $5 billion in an environment of weak metal prices. It has since weathered the storm.
Senior notes are debt securities designed to generate business capital by encouraging investors to subsidise businesses with secure, short-term, interest-bearing loans. They take precedence over other unsecured notes in the event of bankruptcy, and therefore also pay a lower coupon rate of interest.