Miner Anglo American is seeking to buy back up to $1.3bn of its bonds from investors, about a quarter of the total debt reduction target announced in its turnaround plan on Tuesday.
The company published a tender offer on Thursday for debt coming due in 2016, 2017 and 2018, with a ceiling of $250m on its purchase of the bonds maturing in 2016.
Anglo American was downgraded to junk by Moody’s on Monday ahead of its annual results on Tuesday. The Johannesburg and London-Based company announced a loss of $5.5bn and an intention to sell between $3bn and $4bn of assets as well as cutting its debt by more than a quarter — the company has total debt of about $17bn, writes capital markets correspondent Gavin Jackson.
For all of the bonds maturing after this year, Anglo will pay a price below the face value of the debt allowing it to book an immediate profit.
Purple line- 2022 $ bond Turquoise line- 5-year senior CDS
The company said the buybacks “are being made as part of the company’s ongoing pro-active capital management” saying that the purpose was to “reduce gross debt and support the company’s debt maturity profile” as well as to reduce the amount it is paying in interest.
Bond holders, unlike shareholders, are usually anonymous and for this reason debt buybacks can take a long time. Investors have until February 25 to respond to the offer.
It is offering to buy back euro-denominated bonds coming due in December 2016 with a 4.375 per cent coupon, November 2017 bonds with a coupon of 1.75 per cent and May, April and September 2018 bonds with coupons of 1.75 per cent, 6.875 per cent and 2.5 per cent respectively.
The company is also buying back sterling bonds with a coupon of 6.875 per cent coming due in May 2018 and two US dollar bonds coming due in 2017 with a coupon of 2.625 per cent.
Anglo was the worst performer in the FTSE 100 index in 2015 as the company suffered heavily from the falls in commodity prices that happened throughout the year.
BNP Paribas are the global coordinators alongside dealer managers Commerzbank and Credit Agricole.
Click here for more on how Anglo American failed to adapt to a booming Chinese economy.
Chart courtesy of Bloomberg
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