Glencore prices first bond since market lockout

(Rewrites throughout, adds context)

By Laura Benitez and Jon Penner

LONDON, April 26 (IFR) - Glencore (Xetra: A1JAGV - news) ended a year's hiatus in the bond markets Tuesday with a Swiss franc offering that priced much tighter than anything the embattled mining giant could have got in dollars or euros.

But the company, locked out of the markets since a dire analyst warning last year, still had to pay up relative to its last transaction in the currency in 2014.

Glencore opened books for a minimum SFr150m five-year at 2.25% area, equivalent to mid-swaps plus 279.5bp area. It (Other OTC: ITGL - news) had sounded out investors at 2.0%-2.25% (mid-swaps plus 255-280bp).

Leads Credit Suisse and UBS (LSE: 0QNR.L - news) upsized the deal three times, finally printing a SFr250m transaction at par to yield 2.25%.

It was Glencore's first foray into the markets since a damning note in September from analysts at Investec (LSE: INVP.L - news) that sent the company's stocks and bonds into freefall.

The analysts warned that almost all of Glencore's equity value could evaporate unless it underwent a restructuring.

But the company's outlook appears to have improved substantially since then.

It was able to secure a US$8.4bn in commitments from its lenders as part of an early refinancing of its short-term debt.

And its December 2020 SFr500m note, which dropped to a cash price of 64.50 the day after the report, is now bid at a cash price of 97.50, according to SIX.

But that note priced at 1.25%, 100bp below what Glencore had to offer to get Tuesday's deal over the line.

The new bond will help refinance a SFr825m maturity that was paid in early April and an upcoming US$1.33bn fixed and floating deal due at the end of May.

The new issue premium, approximately 35bp, is nevertheless dramatically tighter versus swaps than on Glencore's equivalent euro and dollar bonds.

The deal came around 85bp inside Glencore's euro curve and 96bp inside dollars.

The issuing vehicle is Glencore Finance (Europe) SA, which is rated Baa3 by Moody's and BBB- by S&P - or just on the cusp of investment grade.

This entity's euro bonds will be eligible for the ECB's upcoming corporate bond buying programme, although one analyst said that he thought the impact of this has mostly already been priced in. (Reporting by Laura Benitez and Jon Penner; Editing by Helene Durand, Robert Smith, Alex Chambers and Marc Carnegie)