8-KSecurities & Listing

FREEPORT-MCMORAN INC 8-K Report, Unregistered Securities Sale (Dec 18, 2008)

Filed December 18, 2008For Securities:FCX

Summary

Freeport-McMoRan Copper & Gold Inc. (FCX) announced a strategic move to encourage the conversion of its 5½% Convertible Perpetual Preferred Stock into common shares. The company engaged in privately negotiated transactions to incentivize holders of approximately 0.3 million shares of preferred stock, with a liquidation preference of $268 million, to convert them into approximately 5.8 million shares of FCX common stock. To further sweeten the deal, FCX will issue an additional 1.0 million shares of common stock, valued at approximately $22 million, as an inducement. This transaction will result in a $22 million charge to preferred dividends in the fourth quarter of 2008, but is expected to yield approximately $15 million in annual preferred dividend savings going forward.

Key Highlights

  • 1FCX induced the conversion of approximately 0.3 million preferred shares into common stock.
  • 2An additional 1.0 million common shares will be issued as an inducement for conversion, valued at $22 million.
  • 3A $22 million charge to preferred dividends will be recorded in Q4 2008.
  • 4The company expects to save approximately $15 million annually in preferred dividends.
  • 5Post-transaction, approximately 0.8 million shares of 5½% Preferred Stock remain, convertible into 17.9 million common shares.
  • 6The transactions were conducted under the exemption provided by Section 3(a)(9) of the Securities Act of 1933, meaning they were unregistered sales.

Frequently Asked Questions

The primary purpose is to reduce the outstanding balance of preferred stock and associated dividend obligations by incentivizing existing preferred shareholders to convert their shares into common stock.

In the short term, FCX will record a $22 million charge to preferred dividends in the fourth quarter of 2008. However, this is offset by the anticipated future savings.

The long-term benefit is a reduction in annual preferred dividend payments, with an expected saving of approximately $15 million per year. This also simplifies the capital structure by reducing the amount of preferred stock outstanding.

No, these transactions involved unregistered sales of equity securities, conducted under the exemption provided by Section 3(a)(9) of the Securities Act of 1933. This exemption typically applies to exchanges of securities between an issuer and its existing security holders when no commission or other remuneration is paid for soliciting the exchange.