Barrick Secures Covenant Change and Extends $4 Billion Credit

  • Revolver's termination date is extended one year to 2021
  • China's ICBC joins previous 20 banks in the facility

Barrick Gold Corp., the world’s largest producer of the metal, extended a $4 billion revolver loan by a year and negotiated a covenant change.

The termination date for most of the credit was extended by a year to 2021, Toronto-based Barrick said in a statement on Thursday. Lenders also agreed to replace a minimum net worth requirement with an obligation to maintain net debt to total capitalization of less than 0.60, it said. As of Sept. 30, 2015, that ratio was about 0.42.

“These terms are more favorable because the covenant is directly tied to the deleveraging that we’re doing now,” spokesman Andy Lloyd said by telephone. “As we improve, and reduce debt, that ratio improves, which means we’re going to have significantly more headroom than we did under the old covenant.”

Earlier this week, Barrick announced a second offer to buy back outstanding debt, saying it would purchase as much as $1.15 billion in notes. That followed an offer in September to buy as much as $750 million in debt. Once that debt repurchase is complete, the company’s net debt to capitalization will improve further, Lloyd said.

"We have no intention of drawing on our credit facility right now," he added.

Industrial and Commercial Bank of China Ltd. joined the facility with the 20 banks that were previously part of it, Lloyd said.

About $3.6 billion of the fully undrawn revolver -- in which funds can be borrowed again once they are repaid -- will be extended to January 2021. The remaining $400 million terminates in January 2020.

As gold prices trade near five-year lows, Barrick has responded with an aggressive strategy aimed at shoring up its balance sheet and cutting it’s debt by $3 billion. Last month, it announced the sale of a package of Nevada mines to Kinross Gold Corp. and private equity firm Waterton Global Resource Management for $720 million.

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