Brazilian miner Vale S.A. issues U.S.-dollar bonds

Brazilian miner Vale S.A. tapped the U.S. dollar debt market for the first time in almost four years as a commodity-price recovery brings down the Brazilian mining giant’s borrowing costs.

The company’s subsidiary Vale Overseas Limited, issued and priced its senior unsecured $1.25bn bond due 2021. The notes are guaranteed by Vale S.A.

Joint Books are BB Securities, Bank of America, Bradesco BBI, HSBC and Santander.

The company, which last sold U.S. dollar bonds in 2012, would use proceeds from the issuance to develop its iron-ore project, which it plans to commission later in 2016.

Separately, the company plans on divesting assets worth $10bn by 2017 after reporting a fourth-quarter net loss of $8.6bn.

Source: Bloomberg

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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

Noble Group faces rising cost of debt amid restructuring deal

According to Noble Group’s CEO Yusuf Alireza, the company is planning to restructure its debt amid rising borrowing costs. The firm seeks to recover from a commodity market slump that saw it post its first annual loss in almost 20 years and had its credit rating downgraded to junk.

As per the company’s presentation for its upcoming AGM, average cost of debt was seen rising from an estimated 3.9% in 2016 to 4.1% in 2017, before dropping back to 3.8% in in 2018. Although borrowing costs were rising on the company’s revolving facility, its weighted-average cost of debt was expected to remain at the same level.

Further, the company seeks to raise a $1bn unsecured loan on which it faces higher borrowing costs, and was also looking to raise a $2bn loan backed by inventories.

CEO Alireza stated that the company aimed to refinance debt before May 2016.

Source: Bloomberg

Moody’s downgrades BHP Billiton

Mining giant BHP Billiton’s credit rating was downgraded by rating agency Moody’s to A3 from A1 amid a prolonged commodity price slump. The move follows a rating downgrade conducted earlier by S&P.

The downgrade adds to its disappointing first-half results where the company recorded losses of $5.6bn, mainly on write-downs of its U.S energy assets. The dismal earnings also led to the suspension of its dividend policy.

Price of iron ore, the commodity which accounts for a large chunk of BHP’s earnings, was down more than 70% since its peak in 2011 of nearly $192 a metric ton.

The firm has struggled with the outcome of a pending claims settlement case related to its investment in Samarco Mineracao, a Brazilian mining firm, formed by 50:50 JV with Vale S.A. Samarco faced a lawsuit in Brazil related to its dam bursting incident in which state authorities seek a compensation of upto BRL 20bn ($5bn). However, a statement released by JV partner Vale states that an agreement with the Brazilian authorities could allow the companies to pay BRL 9.6bn in compensation by 2030.

Source: WSJ