UPDATE 2-Activist investor Casablanca may sue miner Cliffs in proxy fight

Thu May 29, 2014 5:46pm EDT
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(Adds Cliffs' response)

May 29 (Reuters) - An activist investor trying to win control of Cliffs Natural Resources Inc's board said on Thursday it may take the mining company to court over a "proxy put" that could trigger a liquidity crisis.

In a regulatory filing last week, Cliffs said it may be forced to repurchase its outstanding senior notes because of a change of control provision on the notes if all six of hedge fund Casablanca Capital's nominees were elected to its board.

Casablanca, which wants to replace Cliffs' chief executive and separate the company's U.S. assets from its international properties, said on Thursday that Cliffs could defuse the problem by approving its nominees "not as an endorsement, but merely for the narrow purpose of not triggering the proxy put."

"Instead of implementing this now-common corporate governance measure, the board has implied a willingness to put the company's very existence at risk, employing brinkmanship with the company's liquidity in an attempt to preserve its current seats," Casablanca said in a statement.

Cliffs said in a statement late on Thursday that its board "will consider" whether to approve Casablanca's nominees.

Defending itself against Casablanca's accusations, Cliffs said the change of control provision was standard for most companies with publicly issued debt, had been previously disclosed and had to be disclosed now due to U.S. Securities and Exchange Commission rules regarding change of control.

"With regard to Casablanca's 'proxy put' accusation, in no way is Cliffs threatening its shareholders," Cliffs said.

Casablanca said it would "protect shareholder interests by all available means, including litigation" if Cliffs did not approve its nominees.   Continued...