Vale Breaks Dollar-Bond Drought as Metal Rebound Cheapens Debt

  • Company is developing the world’s biggest iron-ore project
  • Yield on bonds due 2022 fell to 10-month low 5.61% on Tuesday

Vale SA is tapping the U.S. dollar debt market for the first time in almost four years as a commodity-price recovery brings down the Brazilian mining giant’s borrowing costs.

In a statement Tuesday, the Rio de Janeiro-based miner said it planned to sell overseas notes maturing in 2021. Vale priced $1.25 billion in five-year notes at 5.875 percent, said a person familiar with the matter, who isn’t authorized to speak publicly. The yield on its 2022 bonds is at a 10-month low 5.61 percent.

The company -- which last sold U.S. dollar bonds in 2012, according to data compiled by Bloomberg -- is developing the world’s biggest iron-ore project, which it plans to bring online later this year, as it battles to bring down debt levels. The new bonds are denominated in dollars, a Vale spokesperson said. 

“Timing is good because the market is yielding for risk, everybody wants to take risk,” Patrik Kauffman, a money manager at Solitaire Aquila Ltd. in Zurich, which has $11 billion in assets.

First Loss

Vale is returning to the dollar debt market after its bonds returned 19 percent this year, in line with the global mining companies tracked by Bloomberg. Last year, Vale’s notes lost 22 percent as slowing Chinese demand fed a global metal glut that led to the company’s first annual loss since its 1997 privatization.

Seeking to raise $10 billion through asset sales by next year, Chief Executive Officer Murilo Ferreira broke with tradition in February, saying the company would consider selling core assets after reporting a fourth-quarter net loss of $8.6 billion.

Banco Bradesco BBI SA, BB Securities Ltd., HSBC Securities (USA) Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Santander Investment Securities Inc. will be joint lead managers and joint book runners for the bond sale.

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