Glencore International is multi-tasking, as the global commodities trading giant launched a $9 billion loan refinancing at the end of March while preparing for a possible $10 billion IPO in London and Hong Kong, according to Thomson Reuters IFR, a sister publication to Buyouts.
As with most of the other commodities firms, Glencore’s primary motivation for tapping the market was to extend the maturity of 364-day facilities put in place last year. The Swiss commodity giant also has attracted the interest of the buyout community: A group of institutional investors in December were lined up to invest about $2.2 billion into Glencore, according to sister news service Reuters, which cited the Wall Street Journal. U.S. buyout firm
Glencore is refinancing the $9 billion loan to extend the maturities of two 364-day revolving credits on last year’s $10.22 billion loan, which finances the company’s trading lines. The revolving credits pay Libor+110 basis points and include one-year extension options and one-year term-out options. Glencore is also extending the maturity of an existing three-year tranche by one year, which pays Libor+200, bankers said.
“Refinancing was the key motivation: the one-year credits were up for renewal, but the company has also been able to reduce its funding cost,” a banker close to the deal said. Glencore declined to comment.
The new loan represents a significant saving on the 135bp–150bp interest margin on Glencore’s existing $10.22 billion loan. Although commodities companies traditionally pay higher margins than corporates, due to drawdown and heavy usage on their lines, the drop in margins could be problematic for some Asian lenders in a marked about-turn from last year, when Asian loan pricing was lower than European pricing.
Pricing in Asia stabilized in late 2010 while Western European pricing continued to fall, which could make the new refinancings less appealing to Asian lenders, particularly some Taiwanese banks which need more margin, bankers said.
Glencore’s loan is not directly linked to its upcoming $10 billion IPO, but commodities companies offer significant ancillary business opportunities that banks often use to subsidise the cost of providing loans.
Many of the banks lending to Glencore are expected to play active roles on the company’s IPO, which is expected to take place this week in London and Hong Kong, making a busy schedule for the company in addition to bank meetings in London and Singapore on its loan during the preceding week.
The loan is being arranged by mandated lead arrangers and bookrunners BNP Paribas, Credit Agricole CIB, DBS Bank and Rabobank International. A total of 15 banks joined as bookrunners ahead of syndication.
Tessa Walsh is loans editor for Thomson Reuters IFR in London.