Xstrata Plans $4.5 Billion Bond Offering to Refinance Debt

Xstrata Plc (XTA), the world’s largest exporter of coal burned by power stations, plans to sell $4.5 billion of secured debt in a four-part offering through a financing unit to repay maturing obligations.

Xstrata Finance Canada Ltd. intends to issue $1.25 billion of three-year notes to yield 140 basis points more than similar- maturity Treasuries, $1.75 billion of five-year debt at a relative yield of 170 basis points, $1 billion of 10-year securities at a spread of 220 basis points and $500 million of 30-year debentures at 235 basis points, according to a person familiar with the offering who asked not to be identified because terms aren’t set.

Xstrata, which has $2.9 billion of bonds maturing through 2016, may also use proceeds for general corporate purposes, the person said.

Xstrata, the target of a takeover bid by Glencore International Plc (GLEN) now valued at about $33.6 billion, is selling the bonds after its board recommended accepting an increased offer on Oct. 1. The transaction, five years in the making, would couple Glencore’s trading operations with Xstrata’s coal, copper and zinc mines, creating a group with 130,000 employees in more than 40 nations.

Xstrata last sold dollar-denominated debt a year ago, when the finance unit issued $3 billion of securities in a four-part deal. Its $700 million of senior unsecured, 3.6 percent bonds due January 2017 traded at 106.2 cents on the dollar to yield 2.08 percent Sept. 18 with a 140 basis-point spread over similar-maturity Treasuries, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

The bonds may be rated Baa2 by Moody’s Investors Service, signaling the debt is subject to moderate credit risk, the person said.

To contact the reporter on this story: Charles Mead in New York at cmead11@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

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