Glencore offers bonds in Oz as it assesses local targets

Glencore, the miner that’s said it’s assessing acquisitions in Australia, is selling debt in the country for the first time after the discount for shifting funds out of the local currency climbed to an almost two-year high.

The world’s largest exporter of power station coal, which last year completed a $29-billion all-share takeover of Xstrata, is planning to sell five-year senior unsecured Australian dollar-denominated notes via its local unit, according to a statement from joint sale manager National Australia Bank. The five-year Australian dollar basis swap, a measure of the benefit borrowers get to move funds into US dollars, climbed as high as 32.8 basis points on Thursday, the most since October 2012.

The offering, being marketed to yield about 140 basis points more than the swap rate, comes after chief executive Ivan Glasenberg said in March that Glencore may have an interest in buying more assets. The company said then it was assessing a possible bid for BHP Billiton’s Australian nickel unit, although it declined to comment on September 3, when The West Australian newspaper reported it had lodged a proposal valuing the business at at as much as A$230 million ($211-million).

“It’s challenging to see a deep rationale for significant Aussie dollar funding for Glencore, so it may be opportunistic because the basis is in their favour at the moment,” John Manning, a Sydney-based money manager at Aberdeen Asset Management, said in a phone interview. “It’s possible it could be part of potential acquisition plans.”

Anglo American
Glencore Sydney-based spokesperson Francis de Rosa declined to comment on whether the company’s bond offering is related to any acquisition activity.

The notes are expected to be rated two levels above junk by both Moody’s Investors Service and Standard & Poor’s, and should price on either Thursday or Friday, according to the statement. Australia & New Zealand Banking Group and UBS AG are also helping to manage the deal.

Similarly rated mining peer Anglo American has previously sold debt in Australia, pricing A$500-million of November 2018 notes last year at 222 basis points more than the swap rate. Those securities have since rallied to a spread of about 152 basis points, ANZ prices show.

BHP’s Nickel West unit, which includes the Mt Keith, Cliffs and Leinster mines and concentrators, the Kalgoorlie smelter, the Kambalda concentrator and the Kwinana refinery, was excluded from assets being divested into mining’s biggest spinoff, Melbourne-based BHP said in August.

There could be “sizable” nickel deficits in the medium term if Indonesia’s ban on exports of the metal continues, Baar, Switzerland-based Glencore said in an August 20 presentation. – Bloomberg

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