The unexpected suspension of trading in the shares of Fortescue Metals last week is causing headaches for Bank of America Merrill Lynch (BAML), specialist publication reports.
Banks are concerned Fortescue may renegotiate existing debt facilities. It is also in the spotlight since its shares were suspended on Friday, when it said it expected to make an announcement about restructuring its heavy debt load by this week.
Fortescue has become something of a lightning rod for investor concerns about the prospects for Australia's resources boom, which is stumbling after a seven-year bull run. The stock is down 39 per cent since the end of June.
"There is speculation Fortescue may renegotiate covenants on existing facilities," reported, noting that the firm's decision to postpone some development should save US$1.6 billion in capital spending for the 2013 fiscal year.
Fortescue was also the subject of a Moody's rating review on August 30. The rating agency said the group needed to "raise substantial incremental funding to meet project delivery schedule" and maintain debt-to-consolidated cash flow covenants.
Fortunes of the world's No4 iron ore miner, which is almost entirely exposed to Chinese demand for the steel-making ingredient, have suffered in tandem with a near-halving in ore prices over the past year.
