Cliffs Natural Resources Inc. was sued by investors claiming to have suffered losses because they were shut out of a private debt swap that was reserved for institutional buyers, Bloomberg reported on Tuesday. Two investors said in a proposed class-action or group suit that the company violated federal securities law when it executed the private debt exchange that only allowed a select group of institutional bondholders to exchange their unsecured corporate bonds for secured bonds, wrongfully denying retail bondholders an opportunity to participate. Cliffs Natural, the biggest U.S. iron-ore producer, on Jan. 27 reported a smaller-than-estimated quarterly loss after lower costs stemmed the effects of slumping sales. That day, Cliffs Natural offered certain bond investors the ability to swap six types of unsecured notes they held for as much as $710 million of better-ranked, so-called 1.5-lien notes that paid 8 percent and matured in 2020, the company said in a Jan. 27 statement. Only qualified institutional buyers could participate in the exchange. The company issued $218.5 million of the new 1.5-lien notes in February. The suit is Waxman v. Cliffs Natural Resources Inc., 16-cv-01899, U.S. District Court, Southern District of New York (Manhattan).
