CLEVELAND (Reuters)—Miner Cliffs Natural Resources Inc. on Friday [Feb. 14] sharply criticized activist investor Casablanca Capital and said the hedge fund's proposals would put Cliffs credit rating at risk.
Last month Casablanca, which owns about 5.2 percent of Cliffs, urged the iron ore and coal miner to spin off its international operations, form a master limited partnership from its U.S. assets and double its dividend.
On Wednesday [Feb. 12], Casablanca said it was launching a proxy campaign and backing Lourenco Goncalves, former chief executive of Metals USA, to take over as chief executive.
Asked on Wednesday whether he would carry out Casablanca's detailed proposals as chief executive, Goncalves told Reuters the fund's plan offered "good alternatives, but they are alternatives, they are possibilities."
Goncalves argued Cliffs should focus on supplying U.S. steelmakers instead of selling into the competitive global iron ore market, but said it was too early to discuss in detail what he would do with Cliffs' international assets.
Even so, Cliffs' open letter to shareholders focused on Casablanca's January comments. If Cliffs was split up, it said, both companies would be at risk of "negative rating actions."
The Cleveland-based company said it has been studying the possibility of forming a master limited partnership for several months, but the structure is not usually used in volatile industries. Master limited partnerships are investment vehicles that can pass profit to investors in regular payouts before it is taxed, popular in some industries with steady earnings such as the oil pipeline sector.
Cliffs also said Casablanca has failed to show that doubling its dividend would not put operations at risk.
Casablanca did not respond to an e-mail requesting comment on the Cliffs letter.
The miner's share price was higher on Friday, following Thursday's better than expected financial results, up 6.7 percent at $23.36.
By Allison Martell