Glencore Surges as It Wins Vote of Confidence on Refinancing

  • Stock rallies to highest in three months in London trading
  • Banks including ABN Amro, ING, HSBC running the process

Glencore Plc shares surged after Chief Executive Officer Ivan Glasenberg won a vote of confidence from lenders in his ability to steer the mining company through a downturn in commodities and restore the Swiss trader to financial stability.

Glencore shares rallied 17 percent to the highest in three months after the firm signed new loan commitments to replace an existing $8.45 billion revolving credit facility. It received commitments for $8.4 billion in the first phase of syndication, an increase of almost $3 billion above existing levels from 37 senior banks, according to a statement on Wednesday. 

The company signed for $7.7 billion and plans to broaden the refinancing through a general syndication to about 30 additional banks in the second quarter.

The refinancing sends a strong signal regarding Glencore’s capacity to withstand a downturn in prices that’s already forced it to scrap its dividend, sell $2.5 billion of new shares and dispose of assets to raise funds. It also comes after Standard & Poor’s cut Glencore’s credit rating to the lowest investment grade earlier this month after lowering its commodity price forecasts.

It’s “a positive development from the company, and whilst not finalized it is encouraging that there remains healthy demand to lend to Glencore,” Investec Plc analysts wrote in a note. “However, we would be surprised if the interest payments will be reduced as the commodity environment has worsened and the company’s credit rating is weaker than a year ago.”

Reducing Debt

Glencore enacted a $13 billion debt reduction plan last year to alleviate investor concern about its level of borrowing. The stock plunged 70 percent in 2015 and the cost of insuring its debt against default surged as commodities from oil to copper collapsed, eroding profits. The Baar, Switzerland-based company will report 2015 earnings on March 1.

Glencore stock closed at 120 pence in London, the highest since Nov. 5. The shares have rallied 69 percent in the past month.

“It is a positive step and shows the commitment of the banks to Glencore and also removes some near-term liquidity concerns,” Citigroup Inc. analyst Heath Jansen wrote in a note to clients.

Glencore’s 1.25 billion euros of 5.25 percent bonds due March 2017 rose for a fourth day to 101 cents on the euro, the longest streak of gains since November, according to data compiled by Bloomberg.

Bonds Increase

The company’s 750 million euros of 3.375 percent securities maturing in 2020 also had a fourth day of gains, increasing to 86.8 cents, the highest since December.

The new unsecured facility contains a 12-month extension option and a 12-month borrower’s term-out option, extending the final maturity to May 2018.

The bookrunners on the deal were ABN Amro Group NV, HSBC Holdings Plc, ING Groep NV, Bank of Tokyo-Mitsubishi UFJ Ltd. and Banco Santander SA.

Peter Grauer, chairman of Bloomberg LP, the parent of Bloomberg News, is a senior independent non-executive director at Glencore.

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