TEXT - S&P rates Cliffs Natural Resources notes 'BBB-'

Thu Dec 6, 2012 4:16pm EST

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Dec 6 - Standard & Poor's Ratings Services said today that it assigned its
'BBB-' issue-level rating to Cliffs Natural Resources Inc.'s      
proposed senior unsecured notes due 2018. The company is issuing the notes under
its shelf registration for well-known and seasoned issuers filed on March 10,
2010.

The notes will be senior unsecured obligations and will rank equally with all 
of Cliffs' existing and future senior unsecured indebtedness. The company 
intends to use the proceeds from this offering to repay a portion of its 
existing debts, including its $270 million and $55 million private placement 
notes due 2013 and 2015, respectively, as well as for general corporate 
purposes including repayment of amounts outstanding under its term loan due 
2016 and revolving credit facility due 2017. As of Sept. 30, 2012, $922.1 
million was outstanding under the term loan, and $250.0 million was 
outstanding under the revolving credit facility

The 'BBB-' corporate credit rating and negative outlook on Cliffs reflect the 
combination of what we consider to be the company's "satisfactory" business 
risk and "intermediate" financial risk profiles. These assessments reflect the 
company's domestic market position in the North American iron ore market, high 
barriers to entry, and potential to generate significant cash flow throughout 
a cycle. However, our rating also incorporates the highly cyclical nature of 
the iron ore business (given exposure to the volatile steel industry), Cliffs' 
significant customer concentration, the company's relatively high-cost 
structure, and the high capital expenditures associated with bringing its 
Eastern Canadian operations fully online.

We recently revised Cliffs' outlook to negative based on our view that 2012 
and 2013 operating performance will be worse than we previously expected, 
owing to lower-than expected iron ore prices and metallurgical coal prices. 
Our base case scenario uses the assumptions that 2013 iron ore prices will 
remain around current levels of about $120 per ton. As a result, we anticipate 
that Cliffs will generate 2012 and 2013 EBITDA of $1.4 billion and $1.2 
billion, respectively, with debt to EBITDA of 3x to 3.5x, which we consider to 
be weak for the current rating. Furthermore, we believe Cliffs will burn cash 
in 2012, and that cash flow generation in 2013 will be negligible.


RELATED CRITERIA AND RESEARCH
     -- Methodology: Business Risk/Financial Risk Matrix Expanded, Sept. 18, 
2012 
     -- Methodology And Assumptions: Liquidity Descriptors For Global 
Corporate Issuers, Sept. 28, 2011.
     -- Key Credit Factors: Methodology And Assumptions On Risks In the Metals 
Industry, June 22, 2009
     -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008

Temporary contact information: Megan Johnston (917-715-3892); Marie Shmaruk 

RATINGS LIST
Cliffs Natural Resources Inc.
 Corporate credit rating                BBB-/Negative/-- 

New Rating
 Proposed sr unsecured notes due 2017   BBB-
FILED UNDER:
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