How will the $600 million note issuance affect CLF's leverage ratio and credit rating?

The $600 million senior‑unsecured guaranteed note offering will add a sizable new tranche of debt to Cliffs’ balance sheet. Because the notes are senior and unsecured (albeit guaranteed by the company’s domestic parent), the liability will be recorded as senior debt in the capital‑structure model, raising the net‑debt/EBITDA (or total‑debt/EBITDA) leverage ratio by roughly 0.6 × EBITDA‑multiple on a “go‑forward” basis. In other words, if CLF were previously trading at a 2.5× net‑Debt/EBITDA, the new issue will push the metric toward the 3.0–3.1 ×  range, a level that is edging the upper‑end of the covenant band for many AAA‑/AA‑rated peers and could be perceived as a “moderate‑to‑high” leverage increase by rating agencies.

Credit‑rating agencies typically view senior unsecured debt as a higher‑ranking claim than subordinated or mezzanine obligations, but the guarantee does not convert the liability into secured debt. The incremental leverage, coupled with the relatively modest cash‑flow cushion (the company must still service $600 million of interest over the next decade), will likely trigger a “credit‑rating pressure” scenario. Unless CLF demonstrates strong, sustainable free‑cash‑flow generation and a comfortable coverage ratio (interest‑coverage > 5×, net‑leverage below 3×), agencies may issue a “negative outlook” watch or downgrade by one notch (e.g., from AA to A‑) to reflect the higher financial risk.

Trading implications: The market will price this potential rating drag into the equity. Expect modest downside pressure on CLF’s stock on the announcement—typically a 2–3 % intra‑day dip—as investors re‑price the higher leverage and credit‑rating risk. Short‑term traders could look for a pull‑back to the 20‑day moving average or a test of the recent support level around $33–$34, while longer‑term holders will need to monitor any rating agency commentary over the next 30–60 days. A firm‑wide “upbeat” commentary on cash‑flow generation or a tighter covenant package could blunt the downside and offer a short‑cover bounce.