Fortescue Metals shares have posted their strongest gains in five months as the iron ore miner welcomes a $US2.3 billion ($A2.96 billion) debt refinancing and much needed lift in iron ore prices.
Fortescue's offer of senior secured notes was originally worth $US1.5 billion, but it increased it by $US1.8 billion amid strong demand from US investors.
However, analysts say the pure play miner will have to pay an effective interest rate of more than 10 per cent on the debt, substantially higher than previous debt offerings.
"It's pretty expensive for Fortescue," Morningstar Resource Mathew Hodge said.
"It improves liquidity and buys time, that's all."
Fortescue, which had net debt of $US7.4 billion ($A9.54 billion) in March, said US capital markets had shown support for the company as it reduced operating costs.
Chief executive Nev Power said the offer would allow Fortescue to repay in full debts that fall due in 2017 and 2018.
"We've seen strong demand from the market," Mr Power said.
It follows a 13 per cent lift in iron ore prices in recent weeks, including a 4.1 per cent lift overnight to $US52.90 after BHP Billiton signalled it would slow its expansion.
Still, the iron ore price remains subdued.
Fortescue shares gained 18.5 cents, or 9.7 per cent, to $2.09 in their best trading session since late November.
The bond offer comes just a month after Fortescue scratched plans for a $US2.5 billion bond issue because of the unfavourable terms and conditions on US credit markets.
It also follows credit downgrades by Standard & Poor's and Moody's in the past week.
Standard and Poors' downgraded Fortescue's debt issue ratings to BB+ on Thursday because of an increase in secured debt following the company's US$2.3 billion debt refinancing.
Mr Hodge said the bond issue put Fortescue's shorter-term debt worries at bay and gave the company breathing space, but the rate was considerably more expensive than rates offered to the company in March.
While the interest rate on the seven year debt was 9.75 per cent, the effective yield on the sale of the bonds was 10.25 per cent, he said.
Earlier this month Mr Power blamed financial speculators, BHP Billiton and Rio Tinto for recent iron ore price falls he said were ripping the heart out of the industry.
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