Royal Dutch Shell Plc is seeking a $6 billion credit line to replace an existing loan as banks cut borrowing costs for Europe’s largest companies to the lowest in more than five years.
Europe’s largest oil and gas producer is offering to pay an interest margin of 12.5 basis points, or 0.125 percentage point, more than the benchmark rates on the five-year loan, according to three people with knowledge of the matter, who asked not to be identified because the terms are private. Barclays Plc is helping to arrange the financing for the company based in The Hague.
Shell joins Rio Tinto Group and Daimler AG refinancing debt early as Europe’s most creditworthy companies take advantage of cheap rates offered by banks competing to lend. The region’s investment-grade borrowers paid an average 61 basis-point margin on their credit lines this year, the lowest since 2007 and compared with an average 112 basis points in 2012, data compiled by Bloomberg show.
Jonathan French, a London-based spokesman for Shell, confirmed the company’s existing credit line expires in 2015. He declined to comment on the new debt facility.
Europe’s investment-grade companies have agreed to more than $136 billion of credit lines this year, up from $112 billion last year, the data show. Rio Tinto, the world’s second-largest mining company, is marketing $7 billion of credit lines, and luxury-carmaker Daimler obtained a 9 billion-euro ($12 billion) loan in September.
Shell’s revolving credit facility, a type of debt where money repaid can be borrowed again, will replace its $5.1 billion loan raised in 2010 and includes two one-year extension options, said the people. Moody’s Investors Service rates the company Aa1, the second-highest ranking. Standard & Poor’s and Fitch Ratings grade it one level lower at AA.