Glencore Xstrata is seeking to cut debt costs by replacing credit lines with a $15-billion (R159.77-billion) loan, according to four people with knowledge of the matter.
The global commodity trader run by billionaire Ivan Glasenberg is offering lenders a revolving credit facility that pays interest margins as much as 30 basis points, or 0.3 percentage points, less than its existing debt, said the people, who asked not to be identified because the terms are private.
Glencore is benefiting from lower interest rates offered by banks to Europe's biggest companies as lenders cement relationships to generate additional business.
The Baar, Switzerland-based company is replacing $17.3-billion of credit lines it obtained last year after taking over miner Xstrata. The company "can probably afford to play hardball with their banks," after they expanded their business, said Robert Clifford, a London-based analyst at Deutsche Bank AG. "Margins in trading are much thinner than mining, so the cheaper they can get the financing the better their margins will be."
A spokesperson for the Switzerland-based trader, who asked not to be identified citing company policy, declined to comment on the financing.
Interest margins
The company is offering to pay an interest margin of about 50 basis points more than benchmark rates for a one-year loan and a margin of about 60 basis points for a five-year tranche, said the people. That compares with an 80 basis-point margin for last year's one-year loan and 85 basis points for the five-year facility, according to data compiled by Bloomberg.
Investment-grade borrowers in Europe paid an average margin of 73 basis points more than benchmark rates on credit lines arranged last year, the lowest since 2007, according to data compiled by Bloomberg.
BNP Paribas, Citigroup, ING Groep and UniCredit SpA are coordinating Glencore’s deal. The trader follows Trafigura which obtained a $4.7-billion syndicated loan this week, according to data compiled by Bloomberg. ED&F Man Holdings, which buys and sells agricultural products, signed a $2.3-billion loan March 26, the data show.
Peter Grauer, the chairman of Bloomberg LP, the parent coompany of Bloomberg News, is a non-executive director of Glencore Xstrata. – Bloomberg