Rio Tinto commences its $3bn bond buy-back plan

Mining giant Rio Tinto is buying back as much as $3bn of its debt amid a rebounding commodity market.

The company plans to repurchase $2.9bn of notes due in 2018 and will then consider offers from holders of about $5.2bn of bonds maturing in 2020 to 2022.

The buy-back is the company’s second in 2016, with the company repurchasing $1.5bn of debt back in April 2016.

Commodity prices gained in the last week, ending a five-year decline, on gains in prices of raw materials from zinc to soybeans.

In order to cut down on costs and bolster its balance sheet during the commodity slump, Rio sold about $4.7 billion of assets since 2013 and announced a cut in dividend in February 2016.

Source: Bloomberg

Anglo American to buy back $1.3bn debt

Mining firm Anglo American’s subsidiary Anglo American Capital plc plans to re-purchase upto $1.3bn of its bonds from investors as part of its turnaround plan aimed at reducing debt and divesting certain assets.

The company published a tender offer on 18 February 2016 to purchase debt which ends on 16 March 2016.

The plan to puchase debt comes on the news of Moodys’ downgrading the company’s credit ratings to Ba3 from Baa3 on 15 February 2016, ahead of its FY 2015 results announced a day later. S&P also downgraded the company’s credit rating to BB from BBB-.

Key takeaways from the FY 2015 earnings release:

  • Revenue of $23bn vs. $30.9bn a year ago
  • Net loss before tax of $5.5bn vs. loss of $259m a year ago
  • EBIT at $2.2bn vs. $4.9bn a year ago
  • EBITDA at $4.8bn vs. $7.8bn a year ago

Targets for 2016:

  • $3-4bn of asset disposals targeted
  • pro-forma net debt to decline below $10bn by 2016 and to touch $6bn in the medium-term
  • Net Leverage to be less than 2.5x in the medium-term
  • Suspension of dividend payments
  • Capex for 2016 of less than $3bn

Bonds to be purchased include EUR, GBP and USD -denominated bonds with the following maturities:

  • 4.375% bonds due December 2016
  • 1.75% bonds due November 2017
  • 1.75% bonds due May 2018
  • 6.875% bonds due April 2018
  • 2.5% bonds due September 2018
  • 2.625% USD bonds due 2017

Sources: Company Press Releases, PR Newswire, Bloomberg & FT