Glencore Gets $15.3 Billion of Credit Lines to Replace Debt

Glencore Xstrata Plc, the global commodity trader run by billionaire Ivan Glasenberg, refinanced its credit lines with $15.3 billion of syndicated loans.

A group of 69 banks provided the debt, which comprises an $8.7 billion one-year loan and a $6.6 billion five-year credit line, according to an e-mailed statement from the Baar, Switzerland-based company. The facilities can be extended by as much as two years.

Glencore is benefiting from lower interest rates as lenders cement relationships to generate additional business. The deal is the largest syndicated financing for a European company this year, according to data compiled by Bloomberg.

“Current market circumstances are extremely attractive for borrowers, and lack of supply means they can dictate the terms to banks,” Ian Fitzgerald, chief executive officer of Loan Specialist Advisory Services Ltd. and former head of loan markets at Lloyds Banking Group Plc, said in a telephone interview.

Glencore offered to pay interest of 50 basis points, or 0.5 percentage points, more than benchmark rates for the one-year loan and 60 basis points on the five-year financing, data compiled by Bloomberg show. That’s as much as 30 basis points lower than the facilities being replaced.

Investment-grade borrowers in Europe paid an average margin of 63 basis points more than benchmark rates on credit lines this year, the lowest since 2007, Bloomberg data show. More than 90 percent of their loans were to refinance existing debt.

Xstrata Merger

“We have secured sufficient funding for working capital and substantially reduced our financing costs,” Glencore Chief Financial Officer Steven Kalmin said in today’s statement.

Glencore’s financing replaces $17.3 billion of loans signed last June after its takeover of Xstrata Plc, the company said in today’s statement. The debt backs its commodity trading operations and was arranged by BNP Paribas SA, Citigroup Inc., ING Groep NV and UniCredit SpA, it said.

The company, which became the fourth-biggest global miner after the $29 billion Xstrata deal, reported a 20 percent increase in profit last year after copper output rose and costs fell. It sold a Peruvian copper mine for $5.85 billion in April and said the proceeds would be used to reduce debt. Net debt was $35.8 billion at Dec. 31.

Peter Grauer, the chairman of Bloomberg LP, the parent company of Bloomberg News, is a non-executive director of Glencore Xstrata.

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