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BHP Raises $5 Billion as U.S. Mining Bond Spreads at 3-Month Low

BHP Billiton, the world’s biggest mining company, priced $5 billion of notes in its biggest debt raising in more than 18 months, as relative yields on mining bonds in the U.S. were near the lowest level since June.

The four-part transaction follows a 750 million euro ($1 billion) note sale in April and a C$750 million ($727 million) deal by the Melbourne-based company in May, Bloomberg-compiled data show. BHP last sold into the U.S. market in February 2012, when it priced $5.25 billion of debt in a five-part sale.

BHP, which has a $16 billion capital spending program for fiscal 2014, follows Glencore Xstrata Plc (GLEN), Rio Tinto Plc (RIO) and AngloGold Ashanti Ltd. (ANG) in selling new bonds since June as producers seize on low yields and optimism for the long-term outlook for commodities in China and other markets. The average yield premium in a Bank of America Merrill Lynch index of U.S. mining and metals bonds touched 232 basis points this week, a level unseen since June 5.

“High quality corporates are getting good-sized issuance away at the moment,” said Ben Byrne, a credit sector specialist at Citigroup Inc. in Sydney.

Glencore said this month it was selling 750 million euros ($1 billion) of seven-year notes in its first debt sale in the currency since November, while Rio Tinto sold $3 billion of dollar-debt in June.

Photographer:Carla Gottgens/Bloomberg

Signage for BHP Billiton Ltd. is displayed atop the Brookfield Place Tower in the central business district of Perth, Australia. Close

Signage for BHP Billiton Ltd. is displayed atop the Brookfield Place Tower in the... Read More

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Photographer:Carla Gottgens/Bloomberg

Signage for BHP Billiton Ltd. is displayed atop the Brookfield Place Tower in the central business district of Perth, Australia.

Going Long

BHP issued $500 million of three-year, floating-rate notes to yield 25 basis points more than the three-month London interbank offered rate and the same amount of 2.05 percent, five-year debentures to yield 70 basis points more than similar-maturity Treasuries, according to data compiled by Bloomberg. The company’s finance unit also sold $1.5 billion of 3.85 percent, 10-year debt at a relative yield of 125 basis points and $2.5 billion of 5 percent, 30-year securities at a 130 basis-point spread.

The producer sought to tap demand for longer-dated paper, with the 30-year component of yesterday’s BHP sale comprising half the total bond transaction. Just 19 percent of the February 2012 multi-part deal was sold as 30-year debt.

BHP’s 2012 30-year U.S. dollar debt sale was priced to yield 102 basis points more than Treasuries, 28 basis points less than yesterday’s transaction. The yield premium over sovereign securities on the February 2042 notes jumped 10 basis points yesterday to 111, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

“The 30-year tranche was interesting, they certainly hit that one in size,” said Michael Bush, head of credit research at National Australia Bank Ltd. in Melbourne. “When you look at it on the curve, to me that 30-year pricing still looks pretty attractive.”

BHP, which is rated A1 at Moody’s Investors Service and A+ by both Standard & Poor’s and Fitch Ratings, will use proceeds from the bond sales “for general corporate purposes,” according to a statement from the company.

Barclays Plc, Goldman Sachs Group Inc. and JPMorgan Chase & Co. managed the offering.

To contact the reporters on this story: Benjamin Purvis in Sydney at bpurvis@bloomberg.net; David Stringer in Melbourne at dstringer3@bloomberg.net

To contact the editors responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net; Jason Rogers at jrogers73@bloomberg.net

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