Why is FCX redeeming a portion of its subsidiary's senior notes?

FCX's subsidiaries are exercising their option under the Indenture to redeem a portion of the 6.625% Senior Notes due 2021. This action is typically taken to manage debt, potentially reduce interest expense, or optimize the capital structure.

How will the redemption be funded, and what is the impact on FCX?

The redemption will be funded by cash contributions from the parent company, FCX, in exchange for additional equity in the subsidiaries. This means FCX is injecting cash into its oil and gas operations to pay off debt, which will be reflected on its balance sheet through an increase in equity investment in subsidiaries and a reduction in subsidiary debt.

What is the total cost of this redemption for the subsidiaries?

The total redemption price is approximately $224,073,750. This includes the principal amount of $210,000,000, a redemption premium of $10,500,000 (6.625% of $210,000,000), and accrued and unpaid interest up to the redemption date of April 30, 2014.

Does this redemption affect all holders of the 6.625% Senior Notes due 2021?

No, this is a partial redemption of 35% of the aggregate principal amount of the outstanding notes. Only a proportional amount of each noteholder's holdings will be redeemed. The specific details of which notes will be redeemed are typically handled through the trustee.

FCX 8-K SEC Disclosure — Mar 31, 2014

Summary

Freeport-McMoRan Inc. (FCX) announced through its wholly-owned subsidiaries, Freeport-McMoRan Oil & Gas LLC and FCX Oil & Gas Inc., the redemption of 35% of their outstanding 6.625% Senior Notes due 2021. This amounts to a principal redemption of $210,000,000 at a redemption price of 106.625% plus accrued interest, totaling approximately $224,073,750. The redemption is scheduled for April 30, 2014. This action is being funded through cash contributions from the parent company, FCX, in exchange for additional equity in the subsidiaries. Investors should note that this is a partial redemption and is being executed at the subsidiaries' discretion, as permitted by the existing Indenture. The company has provided formal notice to the registered noteholders.

Key Highlights

1FCX subsidiaries are redeeming 35% ($210 million) of their 6.625% Senior Notes due 2021.
2The redemption price is 106.625% of the principal amount, plus accrued interest.
3The total redemption cost is approximately $224.1 million.
4The redemption date is set for April 30, 2014.
5Funding for the redemption will come from cash contributions from FCX in exchange for equity in the subsidiaries.
6This is a partial redemption initiated at the subsidiaries' option under the governing Indenture.
7Written notice of the redemption terms was distributed to registered noteholders on March 31, 2014.

FREEPORT-MCMORAN INC 8-K Report, Corporate Update (Mar 31, 2014)

Summary

Key Highlights

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