Fortescue seeks waivers on debt covenants Fortescue Metals Group, the world's fourth-biggest iron ore producer by volume, has started discussions with its lenders about potential waivers on its debt facilities. The covenants on Fortescue's A$10bn ($10.4bn) of debts are set to be reviewed in December. However, the company wants waivers put in place so it can still have access to its funding lines in the event they are breached because of "extended volatility" in the iron ore market. In a statement published after the Australian stock market had closed on Thursday, Fortescue said: "The company has a supportive banking group and this is a prudent measure that has been taken well in advance of next reporting date and in response to market volatility." Fortescue shares had earlier dropped 14 per cent to A$2.99 following a report in The Australian Financial Review that the company had asked lenders to waive all of its debt covenants for the next 12 months. Fortescue has been hit by a steep fall in the iron ore price, which has declined by a quarter since the start of July to less than $100 a tonne because of concerns about Chinese economic growth. Its shares have fallen 50 per cent over the past year, giving the Perth-based company an equity value of almost A$9.3bn. In an effort to bolster its balance sheet and "preserve" profitability Fortescue recently announced plans to save A$1.9bn by axing 1,000 staff and contractors and delaying a big expansion project in the Pilbara region of Western Australia. It has also sold a power station for $300m and is in discussions with two investors over the sale of a stake in a lower grade iron ore project. Standard & Poor's this week became the latest rating agency to put Fortescue on review for a possible downgrade. S&P said the company, which is rated double B minus, risked breaching its banking covenants unless the iron ore price rallied. S&P said: "Should benchmark iron ore prices persist at less than $110 per tonne for a period longer than to the end of calendar year 2012, we believe this will place significant financial covenant pressure in 2013." Analysts have called on the company to launch an equity fundraising to lower its debt burden and strengthen its balance sheet. However, that option is reported to have been ruled out by Andrew Forrest, the founder and chairman of Fortescue, because it could potentially dilute his 32 per cent stake in the company. There has also been speculation that Fortescue could join forces with Gina Rinehart, the iron ore billionaire, who is developing an adjacent deposit called Roy Hill. Fortescue's discussions with its lenders come as Bank of America Merrill Lynch tried to syndicate a A$1.5bn loan it recently underwrote for the company. Mathew Hodge, analyst at Morningstar in Sydney, said: "Fortescue are in a very bad place right now. They need a much higher iron ore price. Whether they get it is in the lap of the gods.