• Miner to repurchase $1.2 billion of bonds in euros, pounds
  • Buyback was started after Anglo lost investment-grade rating

Anglo American Plc bondholders tendered about $1.2 billion of notes in a debt buyback announced by the miner following the loss of its investment-grade credit ratings.

The buyback covered five series of notes in euros and pounds, with most of the offer prices being less than face value, according to a statement on Friday. The London-based company planned to spend as much as $1 billion in the buyback. A separate tender for dollar-denominated bonds ends next month.

Anglo announced the buybacks on Feb. 18 after being cut to junk at all three major credit-rating companies the same week. The downgrades reflected concerns that low commodity prices will derail a reorganization plan that includes raising $4 billion from mine sales and cutting net debt to less than $10 billion this year from $12.9 billion.
The take-up among bondholders at London-based Anglo contrasts with a Deutsche Bank AG tender concluded earlier this week. The German lender’s offer was largely shunned, partly because of easing concerns about capital strength. The bank eventually accepted offers for less than half its 3 billion-euro ($3.3 billion) target.

Annual Losses

Anglo, which has posted four straight annual losses, said last week that it was taking advantage of a “strong liquidity position” to buy back debt and reduce borrowing costs. Its offer covered notes due in 2016, 2017 and 2018. The $300 million dollar-denominated tender is for bonds maturing next year.

The company has a total of $15 billion of bonds outstanding, according to data compiled by Bloomberg. Its shares have plunged 65 percent in the past year.

The miner this month said it intends to hasten sales of coal and iron-ore assets. The company and other miners have been hobbled by China’s slowdown, which has driven raw-material prices to multi-year lows.

Standard & Poor’s downgraded Anglo to BB, two levels below investment grade, on Feb. 18. Days earlier, Moody’s Investors Service cut the miner to Ba3, or three grades below investment, and Fitch Ratings lowered it to BB+, the highest junk rating.

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