(Adds Cliffs' response)
May 29 An activist investor trying to win
control of Cliffs Natural Resources Inc's board said on
Thursday it may take the mining company to court over a "proxy
put" that could trigger a liquidity crisis.
In a regulatory filing last week, Cliffs said it may be
forced to repurchase its outstanding senior notes because of a
change of control provision on the notes if all six of hedge
fund Casablanca Capital's nominees were elected to its board.
Casablanca, which wants to replace Cliffs' chief executive
and separate the company's U.S. assets from its international
properties, said on Thursday that Cliffs could defuse the
problem by approving its nominees "not as an endorsement, but
merely for the narrow purpose of not triggering the proxy put."
"Instead of implementing this now-common corporate
governance measure, the board has implied a willingness to put
the company's very existence at risk, employing brinkmanship
with the company's liquidity in an attempt to preserve its
current seats," Casablanca said in a statement.
Cliffs said in a statement late on Thursday that its board
"will consider" whether to approve Casablanca's nominees.
Defending itself against Casablanca's accusations, Cliffs
said the change of control provision was standard for most
companies with publicly issued debt, had been previously
disclosed and had to be disclosed now due to U.S. Securities and
Exchange Commission rules regarding change of control.
"With regard to Casablanca's 'proxy put' accusation, in no
way is Cliffs threatening its shareholders," Cliffs said.
Casablanca said it would "protect shareholder interests by
all available means, including litigation" if Cliffs did not
approve its nominees.
In March 2013, a Delaware judge barred the board of
SandRidge Energy Inc from resisting a proxy campaign by
an activist fund, ruling the company could continue campaigning
only if it approved the dissident nominees to avoid triggering a
Cliffs is incorporated in Ohio.
The carrying value of Cliffs' senior notes was $2.88 billion
as of March 31, 2014, according to a recent filing, and it had
$364 million in cash and equivalents.
Hit hard by a tough iron ore market and high costs at its
Canadian operations, Cleveland-based Cliffs appointed a new CEO
in February, and slashed capital spending, indefinitely
suspending an expansion at its Bloom Lake mine in Quebec.
(Reporting by Allison Martell in Toronto and Nicole Mordant in
Vancouver; Editing by Bernadette Baum, Paul Simao and Lisa