Sirius launched the £500mln high-yield bonds on Friday as part of the ambitious US$3.8bn stage 2 financing for its massive fertiliser mine in North Yorkshire.
The bond prospectus has already been published and public ratings from the ratings agencies – ‘B’ from S&P and ‘B-’ from Fitch – have now been received.
Chief executive Chris Fraser and his team need to find enough buyers for the bonds in order to unlock a US$2.5bn revolving credit facility from JP Morgan.
If Sirius is able to secure that financing, it will have enough money to complete the development of its Woodsmith polyhalite mine.
The funds need to be in place by the end of September, otherwise the FTSE 250 group risks running out of money, although bosses are confident of completing the sale of the bonds well before then.
‘Major re-rating’ on the horizon
Assuming Sirius gets the financing away without a hitch, City analysts expect the market to react positively.
“We expect the Senior Debt Event to catalyse a major re-rating of the shares, as it is in our view effectively the key to unlocking Sirius’s vast value potential,” said Shore Capital analyst Yuen Low in a note to clients.
“Beyond that, while Sirius would still be some years from becoming cash generative, an investment in the company should become progressively de-risked and enjoy significant value uplift as it advances towards production, we believe.”
Liberum’s Richard Knight added: “Completion of stage 2 financing should be a significant re-rating catalyst and we expect shares will respond positively to a good outcome from debt markets.”
Huge civil engineering project
Sirius needs the money to fund the development of the Woodsmith mine, one of the biggest civil engineering projects currently being undertaken in Europe.
The mine is 1.5km deep and requires a 37km-long underground conveyor belt to take the minerals from the site to a processing facility.
First production at Woodsmith is expected in 2021, with output increasing to 10mln tonnes by 2024.
Sirius shares were up 1.1% to 16.2p on Monday morning.