LONDON, March 21 (IFR) - Anglo American is poised to sell
its first public bond since it was stripped of its
investment-grade status last year following the shock
capitulation of global commodity prices.
The mining company, rated Ba1/BB+, is expected to sell a US
dollar and/or euro-denominated bond on Wednesday, after holding
investor calls this week.
It is actually seeking to reduce its net debt and will also
conduct a liability management exercise to buy back some of its
euro, sterling and US dollar notes.
Anglo American's euro bonds lost as much as 48 points when
its relegation to junk in February 2016 triggered a wave of
forced selling from investment-grade accounts.
But some investors say they are ready to rebuild a position
in anticipation that the company will soon regain its
"We like the credit, but it's a tricky one to pinpoint
because it's looking less like high yield and more like IG
again," one investor said.
"We've been gradually building a position in our HY
portfolio and are ready to take on more for our IG/crossover
bucket on expectations of it being upgraded to investment-grade
by year-end," the investor said.
The company was upgraded by Moody's to Ba1 with positive
outlook in earlier this month, from Ba2, to reflect its
improving credit profile and accelerated debt reduction, the
"Anglo's ability to affirm its financial policies, including
the dividend policy, will play a key part in sustaining the
improved financial profile and higher ratings," said Elena
Nadtotchi, senior credit officer and the lead analyst for Anglo
at Moody's, earlier this month.
S&P also has a positive outlook on its BB+ rating.
Anglo American paper has recovered strongly over the last
year following a rebound in global mining prices. Its €750m
3.25% Apr 2023 bond is bid at a cash price of 107.06 compared
with lows of 59 in January 2016, according to Tradeweb.
A lead banker said this recovery boosted the rationale for
them to return to the market.
"We've seen a bigger bid for the commodity names lately, so
Anglo saw the LM exercise as a great way to bring investors up
to date on their funding strategy."
Last September, Glencore attracted €5.8bn of orders, its
biggest ever book, for its first euro deal after concerns in
September 2015 over the company's financial health caused its
bonds and stock to plummet.
The commodity trader is selling a 10-year bond in the US
dollar market on Tuesday, its first US dollar issue in two
years, according to IFR data.
Investors and bankers working on the Anglo American deal are
looking at Glencore, rated Baa3/BBB (Moody's/S&P), as a pricing
Glencore's 1.875% Sept 2023 paper is bid at 115bp over
mid-swaps, versus Anglo's Apr 2023s, bid at plus 156bp.
"There's a good 40bp pick up in buying Anglo versus
Glencore, which you would partly expect because the latter is
better rated," the investor said.
"But if Anglo is on that IG trajectory, and we think it is,
you will soon see a further spread compression, so it could be a
good buying opportunity."
Anglo has been de-leveraging its balance sheet since early
2016. In February of that year, it bought back around
€1.6bn-equivalent of short-dated euro, sterling and US dollar
bonds, which cut its debt pile by US$190m.
The borrower has mandated Citigroup and Morgan Stanley as
joint global coordinators to arrange the investor calls.
Citigroup, Credit Suisse, Goldman, Sachs, Morgan Stanley,
and UBS were hired for the potential US dollar transaction, and
Barclays, BBVA, Citigroup, Morgan Stanley, Santander for the
potential euro-denominated part.
Any US dollar notes will be five- to 10-years, while any
euro portion will be an intermediate tenor and a single tranche
(Reporting By Laura Benitez, editing by Sudip Roy and Alex