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Glencore's Rosneft investment is in line with its new-found caution-Moody's
December 8, 2016 / 5:30 PM / 9 months ago

Glencore's Rosneft investment is in line with its new-found caution-Moody's

LONDON, Dec 8 (Reuters) - Glencore’s decision to acquire a stake in Russian state oil giant Rosneft is not financially risky, Moody’s credit ratings agency said, and does not mark any shift from the miner-trader’s new policy of limiting its debt levels.

Russia said on Wednesday it had sold a 19.5 percent stake in Rosneft to Qatar and Glencore for a total of 10.5 billion euros ($11 billion).

Glencore is financing part of the deal with 300 million euros of its own equity, with the rest financed by the Qatar Investment Authority and non-recourse bank financing.

“Looking at the preliminary terms of the Rosneft transaction, we consider Glencore’s intended commitments to be limited,” Elena Nadtotchi, vice president and analyst for Glencore at Moody‘s, said in an emailed response to a question from Reuters.

She added they were in line with Glencore’s statement to investors last week that it was aiming for a net debt to EBITDA (earnings before interest, tax, depreciation and amortisation) ratio of a maximum of 2:1 rather than 3:1 as in the past as it seeks strong investment grade credit ratings.

Last year’s commodity prices rout drove the big miners to embark on asset sales and bond issuance and buybacks to repair their balance sheets.

Glencore’s turnaround has spurred a more than 230 percent rise in its share price this year, making it one of the top performers on the FTSE bluechip index.

News of the Rosneft deal drove it up a further 2 percent on Thursday, compared with a 1.3 percent rise in the broader sector.

As part of the Rosneft deal, Glencore will get an additional 200,000 barrels per day for its marketing business, prompting Bank of America Merrill Lynch to comment “lots of oil for little dollars”. ($1 = 0.9432 euros) (Reporting by Barbara Lewis; Editing by Adrian Croft)

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