This article is part of a Real Money series on 20 companies investors should consider adding to their distressed watch list.
Last month, Freeport-McMoRan (FCX) affirmed that its efforts to ease its debt burden would require time and multiple transactions. On Monday, the ailing Phoenix-based natural resources company announced the first of debt reducing transactions.
The company will be selling a 13% ownership interest in its Morenci mine to Japan-based Sumitomo Metal Mining. Freeport will receive $1 billion in cash from the partial sale of the Arizona-based copper mine, with the proceeds to be used to repay its bank term loan and borrowings under its revolving credit facility.
Prior to the transaction, which is expected to close in the first half of the year, Sumitomo had 15% interest in the Morenci mine.
"This transaction represents an important initial step toward our objective to accelerate debt reduction and restore our balance sheet, while retaining a portfolio of high quality assets and resources," Freeport CEO Richard Adkerson said in a statement released on Monday.
When the company released earnings last month, it made it clear that it was trying to reduce its $20 billion debt load by $5 billion to $10 billion. Many of its bonds are trading well below par and last week Standard & Poor's lowered its rating on the company to BB from BBB-, citing concerns about low commodity prices.
Last week, an analyst team at Nomura led by Alexander Burnes said a sale of the Morenci mine was possible.
Of the announced sale, Burnes wrote in a note on Tuesday that it was "encouraging that high quality mining assets are still achieving fair value."
We'll be watching to see what's next on the auction block for Freeport.
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