Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.
Hello MM Team, Please assist me with my ignorance! I have read in your report about FMG: "Cash balance at $US3.3 billion, net debt at $US2.1 billion ". I am not sure, what the “net debt” actually is. Net of what? Does this mean: • they would have $US3.3 billion left, after paying off their US$2.1 billion debt, or • they have US$5.4 but they have a debt to pay, or • their real cash position is US$1.2 billion ($3.1-$2.1)? Many thanks, John
Hi John,
Fortescue (FMG) delivered their 3Q trading update on Tuesday and as you say they announced Net Debt of $US2.1bn and a cash balance of $US3.3bn as of 31st of March:
Hence in the case of FMG they have $5.4bn in debt before offsetting cash & cash equivalents, this is after paying an interim dividend of $US1 billion and investing a further $US1 billion into capital projects.
It might seem strange to carry debt on one side and cash on the other, but it’s important to maintain an ability/track record with banks and bond investors, making it easier to tap more debt if needed.
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