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The Bank of Nova Scotia said Thursday that it’s looking to sue Cliffs for $52.6 million. According to the bank, the company breached the terms of a loan agreement when it filed for creditor protection for its Quebec-based Bloom Lake mine.
In the months since that’s happened, Cliffs has been honing its focus on its US assets and doing its best to shed the rest of them. And while that strategy is straightforward, it definitely hasn’t been without snags.
The company hit one such snag Thursday when the Bank of Nova Scotia (TSX:BNS) announced that it’s looking to sue Cliffs for $52.6 million. According to the bank, the company breached the terms of a loan agreement when it filed for creditor protection for its Quebec-based Bloom Lake mine.
This is not the first problem Bloom Lake has caused for Cliffs; indeed, Goncalves referred to it as the “cancer we have to take out” just last month. The company has spent approximately $6 billion on Bloom Lake over the past three years without turning a profit — the site was subject to higher-than-expected costs, and the plummeting iron ore price definitely didn’t help. The site also came under some major hot water in December after receiving a $7.5-million fine related to environmental infractions.
Still, despite its financial woes, Cliffs has definitely proven to be proactive towards setbacks, with the company announcing in January that it had reduced its net debt balance by more then $400 million. And while Cliffs is far from being out of deep water, showing its dedication to righting previous wrongs is at least a step in the right direction. It also recently decided to eliminate a quarterly dividend of $0.15 per share on its common shares in an effort to help accelerate its plans for debt reduction.
Furthermore, Cliffs released some news of its own on Thursday, announcing an offer to sell senior secured notes worth $500 million in order to repay all amounts outstanding under its existing revolving credit facility. Still, any funds from the secured notes will do little alleviate the company’s large debt, which was at about $3 billion as of December 31. It’s also unclear how the company will deal with its debt to Scotiabank.
All in all, the company’s share price took a 5.91-percent hit on Thursday to end the day at $4.31. Cliffs is now down 39.64 percent year-to-date.
Securities Disclosure: I, Kristen Moran, hold no direct investment interest in any company mentioned in this article.
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