UK’s Sirius Minerals pulls $500m bond sale

LONDON (ICIS)–Funding for Sirius Minerals’ polyhalite fertilizer mining project in the UK is in danger of collapse after the company scrapped plans for a $500m bond issue necessary to unlock a $2.5bn credit facility.

Shares in the UK-headquartered firm crashed by nearly 50% in morning trading after Sirius conceded that it does not believe the bond offering can be issued in current market conditions.

The company announced plans to postpone the issuance last month after unveiling plans for a $3.8bn funding package for the project in July.

The $2.5bn revolving credit facility – agreed solely with JP Morgan, although the bank had been expected to syndicate out tranches of the debt to other groups – was contingent on Sirius successfully issuing the bond before 29 October.

$400m in convertible bonds, which had been held in escrow since the issuance in May, will be redeemed and the proceeds returned to shareholder.

Sirius cited “global market conditions and the uncertainty related to Brexit” as reasons for the cancellation, but added that it had originally been in discussions with the UK government about securing funding for the project through its Infrastructure and Projects authority, citing “lack of depth in the commercial bank project finance market”.

Discussions with the government were halted after the company decided to take fundraising plans to the market.

Sirius re-opened talks after the extent of market weakness became more apparent, requesting that the government guarantee $1bn of bonds, but UK authorities decided not to provide support.

“Due to the ongoing poor bond market conditions for an issuer like Sirius we have not been able to deliver our stage two financing plan,” said Sirius CEO Chris Fraser.

“As a result, we have taken the decision to reduce the rate of development across the project in order to preserve funding,” he added.

The company intends to slow the scope of construction work on the Woodsmith mining project being developed in northern England while it takes a six-month review to examine how to move the project forward, which will likely include seeking a strategic partner.

At present, Sirius has cash reserves of £180m, of which £100m was uncommitted as of 31 August.