In mid-2001, the copper magnate issued US$603.75 million worth of senior convertible notes maturing in five years and bearing interest at 8.25% annually. Half the principal was converted to 21.76 shares in late 2003 and now US$181 million has been converted into 12.6 million shares. The remaining US$113 million worth of notes are to be redeemed in the second half of this year.
“This transaction is an additional step to reduce debt and enchance our financial flexibility,” says Freeport President Richard Adkerson. “The conversions . . . further strengthen our balance sheet and will result in annual cash savings of approximately US$5 million at the current level of common stock dividend.”
Freeport pays a quarterly dividend of US20 per share and now has 196 million shares outstanding.
As a result of the recent conversion, Freeport will record a charge of US$10 million to first-quarter net income, reflecting the conversion expense. The funds were repaid from restricted cash held in escrow since the notes were issued.
On Sept. 30, 2003, Freeport had US$2.29 billion in total debt, or US$1.73 billion net of cash and restricted investments. The latter amount was expected to have risen by US$20 million at the end of that year.
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