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Glencore offers to buy back more bonds

Reuters - UK Focus

By Natalie Harrison

NEW YORK, Dec (Shanghai: 600875.SS - news) 1 2016 - Commodities trader and miner Glencore (Amsterdam: GX8.AS - news) will buy back up to US$1bn of its outstanding US dollar bonds, its second such exercise in the past two months to smooth out debt maturities.

The new tender for four US-dollar denominated bonds, three of which were included in a similar offering in October, was announced during an update to investors on Thursday.

For its US$593m 3.125% 2019s and US$878m 2.50% 2019s, Glencore (Frankfurt: 8GC.F - news) will pay 95bp and 90bp respectively over Treasuries, plus an extra US$30 early-bird premium if the notes are tendered before December 14 2016.

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Glencore will pay US$1,010 per US$1,000 in face value for its US$500m floating-rate notes due 2019, including a US$30 early-bird premium.

Glencore is also offering to buy back the US$1bn 2.875% 2020 bonds at a fixed spread of 75bp over Treasuries.

"This will further help the company smooth out its bond maturity profile and strengthen its balance sheet," a banker familiar with the details told IFR.

The October tender offer was well received by investors -increased to US$1.5bn from US$1.25bn on the back of strong interest. Investors are being offered a premium in the region of 40-50bp on some of the bonds in the new tender, the banker said, which should also help ensure it is well received.

Glencore's bond spreads and credit default swaps have rallied sharply over the past few months - partly because of the company's commitment to reduce debt. Its 1bn seven-year bond issue in September - its first in euros since the sell-off - was six times oversubscribed.

Glencore said it was on target to lower its net debt to US$16.5bn-$17.5bn by the end of this year, having already slashed it by US$12.5bn in the past 18 months.

Having a strong Triple B rating is also a top priority for the company. Glencore is currently just one notch above junk with Baa3/BBB- ratings from Moody's and S&P following downgrades in late 2015 and early 2016 on the heels of a commodity rout.

"Lower gearing=less risk," the company said in the update.

"That should result in lower overall cost of capital."

Morgan Stanley (Xetra: 885836 - news) and UBS (LSE: 0QNR.L - news) are lead dealer managers. (Reporting by Natalie Harrison; Editing by Shankar Ramakrishnan)