March 14, 2016 (Shareholders Foundation) - An bondholder filed a lawsuit on behalf of all bondholders of 5.90% Senior Notes due 2020 (CUSIP 18683KAA9) and 6.25% Senior Notes due 2040 (CUSIP 18683KAC5) in the U.S. District Court for the Southern District of New York over alleged violations of Federal Securities Laws by Cliffs Natural Resources Inc.

According to the complaint the plaintiff alleges on behalf of bondholders of 5.90% Senior Notes due 2020 (CUSIP 18683KAA9) and 6.25% Senior Notes due 2040 (CUSIP 18683KAC5) who are not qualified institutional buyers, that the defendants violated Federal Securities Laws.

More specifically, the plaintiff claims that Cliffs Natural Resources Inc, which has experienced financial challenges in the face of falling commodity prices, attempted to alleviate the pressure on servicing its debt by making the exchange offer to a limited number of its bondholders.
Under the terms of the offer, certain senior notes would be exchanged for newly-issued 8.00% 1.5 Lien Senior Secured Notes due 2020.

The plaintiff alleges that the February 29, 2016 exchange — which allowed participation only by bondholders who were qualified institutional buyers (as defined under Rule 144A of the Securities Act of 1933) — violated the rights of the remaining non-qualified institutional buyers.
The plaintiff says that prior to the exchange, the total principal value of the 2020 and 2040 Notes outstanding was approximately $783.6 million and that after the exchange, $259.5 million in aggregate principal amount of the notes had been tendered in the exchange offer, while approximately $524.1 million in principal amount of the 2020 and 2040 Notes were not tendered.
The suit against by Cliffs Natural Resources Inc contends that the company disclosed only to qualified institutional buyers its views on the risk of not exchanging the unsecured senior notes into the senior secured notes, while failing to share its views on risk with the plaintiff bondholders.