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| Latest News - HELLENIC SHIPPING NEWS WORLDWIDE |
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Glencore Sells Bonds to BlackRock, GIC, First Reserve |
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Wednesday, 23 December 2009 |
 Glencore International AG, the biggest commodity trader, sold as much as $2.2 billion of convertible bonds to investors including BlackRock Inc. in what may be the first step toward an initial public offering.
The bonds, which are due December 2014, are convertible into Glencore
shares upon an IPO or “other pre-determined qualifying events,” the
Baar, Switzerland-based trader said today in an e-mailed statement. The
terms of the bonds give Glencore a pre-conversion equity value of $35
billion, it said.
Other buyers of the bonds include Government of Singapore Investment
Corp., Greenwich, Connecticut-based private equity investor First
Reserve Corp., and Zijin Mining Group Co., China’s third-largest copper
producer, Glencore said.
Glencore, led by Chief Executive Officer Ivan Glasenberg, saw net
income slide 56 percent to $1.8 billion in the first nine months of
2009 after commodities fell. It sold its Prodeco coal assets in
Colombia in March for $2 billion to Xstrata Plc, in which Glencore has
a 34 percent stake. Glencore will likely use proceeds from the bonds to
take up its option to buy back Prodeco, Barclays Capital credit analyst
Neil Beddall said.
“That’s why they pressed the button on this investment now,” Beddall
said by phone from London. “Longer term, the IPO will be used to pay
out the senior partners and to alleviate the liquidity concerns some
had over the business.”
‘Important Milestone’
The offering was increased from between $1.5 billion and $2 billion because of “strong” demand, Glencore said.
“This transaction, in which Glencore is opening up its equity capital
to outside investors, marks an important milestone as we embark on the
next stage of our corporate development,” Glencore said in the
statement.
“As economic growth resumes, the outlook for most commodity markets is continuing to improve,” it said.
Credit-default swaps on Glencore dropped 4.5 basis points to 148.5,
according to CMA DataVision prices at 12:22 p.m. in London. That’s down
from an equivalent 3,325 basis points last December and means it costs
148,500 euros ($212,000) a year to insure 10 million euros of the
company’s debt against default for five years.
Credit-default swaps pay the buyer face value in exchange for the
underlying securities or the cash equivalent should a company fail to
adhere to its debt agreements.
Glencore, which is owned by its employees, trades metals and oil and
controls mines and smelters. In addition to the stake in Zug,
Switzerland-based Xstrata, Glencore has 9.7 percent of United Co.
Rusal, the largest aluminum producer.
Commodity Rebound
Glencore’s credit rating was cut by Standard & Poor’s to BBB-, the
lowest investment grade, a year ago. The trader said in March senior
staff agreed to delay future termination payments until at least
January 2012 to strengthen its finances.
An IPO could happen “sooner rather than later” as some Glencore
shareholders may seek to exit the company, Beddall said. Glencore sets
aside money for payments to employees after they leave.
The trader had cash and committed credit facilities of more than $4
billion as of Sept. 30, ahead of its liquidity target of $3 billion, it
said in a report to bondholders in November. Net debt fell to $9.3
billion at Sept. 30, from $10.4 billion at June 30.
The company was founded in 1974 by former U.S. fugitive Marc Rich, who
sold the company to senior managers 20 years later. He no longer has a
stake in the company.
Citigroup Inc. and Morgan Stanley advised Glencore on the offering.
Source: Bloomberg
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