Breaking bond barriers
Commodity trading powerhouse Glencore International made the headlines in November last year after signing a US$1.26bn bond facility that was increased from an initial amount of US$750mn.
The overall structure has impressive features, allowing swift and effective issuance of relevant instruments.
The syndicated committed bond facility is a one-year committed transaction with a one-year extension option that provides Glencore with a framework in which it can issue a performance bond, bid bonds, standby letters of credit (LCs) and other guarantees with a tenor of up to 18 months to support its commodity trading activities.
These namely allow for:
- Roll-in for existing instruments.
- Same day issuance (with late cut-off) of instruments.
- Involvement/insight of broad syndicate in Glencore’s trade finance needs.
- Temporary step-out mechanism on specific instruments for individual syndicate members.
Glencore International AG, based in Baar, Switzerland, is a leading privately-held, diversified natural resources company with worldwide activity in the smelting, refining, mining, processing, purchasing, selling and marketing of metals and minerals, energy products and agricultural products.
Glencore is rated BBB- (stable) and Baa3 (stable) respectively by Standard & Poor’s and Moody”s. For the 2005 fiscal year, the company’s turnover was US$91bn, total assets were US$32bn and total shareholder funds were US$6.4bn as at December 31, 2005.
Glencore is one of the world’s largest suppliers of a wide range of commodities and raw materials to industrial consumers. Its commercial counterparts are both producers and industrial consumers. “Our role is to be a reliable and competitive partner to businesses in the segments of the market which we serve and to support these businesses as they expand and develop,” states the company.
”Our customers around the world, in industries such as automotive, power generation, steel production and food processing, rely upon our established global network of operations as a source of metals and minerals, crude oil and oil products, coal and agricultural products.”
These commodities originate either from Glencore’s directly or indirectly-owned production assets, or are secured by Glencore from third parties, or they benefit from the refining, processing or marketing expertise of Glencore.
The company directly or indirectly employs over 2,000 people worldwide in some 50 offices in over 40 countries. “In our industrial operations Glencore directly or indirectly employs over 50,000 people in 23 plants in 14 countries,” claims the firm.
Seven months earlier Glencore had borrowed a two-tranche €7.5bn revolving loan, raised in syndication from €6.25bn. Some 13 mandated lead arrangers led the deal: bookrunners Barclays, BNP Paribas, JPMorgan and Société Générale, with ABN Amro, Citigroup, Credit Suisse, Deutsche Bank, HSBC, ING, LloydsTSB, Morgan Stanley and Royal Bank of Scotland.
The first tranche was a 364-day tranche with a one-year term out option and a 364-day extension option priced at Libor plus 37.5bp. The second was a three-year tranche with two one-year extension options priced at 47.5bp over Libor.
This loan refinanced a previous US$2.31bn 364-day and a US$4.415bn three-year revolver.
Then, in November 2005 mandated lead arrangers ING and RBS closed a US$885mn syndicated committed bond facility for Glencore which was initially launched at US$500mn. The one-year issue replaces a US$500mn committed bond facility signed a year previously.
Assets fully or partly controlled by Glencore as of 2006
|Evergreen Aluminum||Aluminium||Washington, US||100%|
|Columbia Falls Aluminum||Montana, US||100%|
|Century Aluminum||HQ: Monterey, US||23%|
|Prodeco||Coal||Santa Marta (port) and Calenturitas (mine), Colombia||100%|
|Carbones de La Jagua (formerly Caribe)||La Jagua, Colombia||100%|
|Los Quenuales||Zinc, lead||Yauliyacu, Peru||97%|
|Sinchi Wayra||Zinc, lead, tin||Five mines, Oruro and Potosi regions, Bolivia||100%|
|Aguilar mine||Zinc, lead, sulphuric acid||Northwest Argentina||100%|
|Moreno||Sunflower oil, meal||Crushing plants: Necochea, Daireaux, Villegas and Grainer; Argentina||100%|
|Portovesme||Zinc, lead||Sardinia, Italy||100%|
|Kubikenborg Aluminium (Kubal)||Sundsvall, Sweden||100%|
|Mopani Copper Mine||Copper||Zambia||73%|
|Russneft||Oil||Oilfields across Russia||40-49%|
|Rostov on Don grain export elevator and wheat flour mill||Cereals||Rostov on Don, Russia||100%|
|Murrin Murrin Joint Venture||Nickel, cobalt||Western Australia||70.3% (effective)|
|Cobar Copper Mine||Copper||NSW, Australia||100%|
Other subsidiaries, participations and joint ventures
|Xstrata||Mining||HQ: Zug, Switzerland||About 14%, controlling 40%|
|Minara Resources||HQ: Perth, Australia||50.5%|
|Cerrejn||Coal mining||Guajira department, Colombia||33.3% up until Q2 2006|
Borrower: Glencore International
Mandated lead arrangers: ICICI Bank;ING; RBS
Lead arrangers: ABN AMRO; Bank of Tokyo-Mitsubishi UFJ; BNP Paribas; Caja Madrid; HSH Nordbank; KBC Bank; Mizuho Corporate Bank; Atradius Credit Insurance
Co-arrangers: BSCH; Bayerische Hypo-und Vereinsbank; Commerzbank; DBS Bank; Deutsche Bank; Dresdner Bank; DZ Bank; KfW Ipex-Bank; Landesbank Hessen-Thueringen; Natexis Banques Populaires; RZB; SanPaolo IMI; Scotia Bank Europe; SEB; SMBC; Union de Banques Arabes et Francaises
Margin: 35bp plus fees
Law firms: Linklaters (borrower); Clifford Chance (lenders)
Date signed: November 2006