(Adds to banking group)
By Laura Benitez
LONDON, April 3 (IFR) - Anglo American is set to sell its first public bond since it was stripped of its investment-grade status in February 2016 following the capitulation of global commodity prices.
The mining company started marketing a US dollar-denominated benchmark five-year deal at a yield of 4.25%-4.375%, and a US dollar-denominated benchmark 10-year deal at 5.125%-5.25% on Monday.
“It was a matter of time before they came back to the market, but they wanted to wait until sentiment had recovered from last week’s volatility,” a lead banker said.
Anglo, rated Ba1/BB+, initially held investor calls two weeks ago.
However, bankers on the deal attributed the recent dip in oil prices, which saw Brent futures fall to just above US$50 per barrel on March 22 before recovering to above US$53, and a turn in sentiment in equities - the S&P 500 fell 1.4% in March - as the reason Anglo delayed its market return, as well as the underperformance of peer company Glencore.
Commodity trader Glencore’s US$1bn 10-year bond was bid at a wide of 183bp over Treasuries last week, 13bp wider than where it priced on March 21, according to Tradeweb data.
However, that bond has since recovered to a bid of 176bp over Treasuries on Monday afternoon.
Anglo American’s euro bonds lost up to 48 points when its relegation to junk 14 months ago initiated a bout of forced selling from investment-grade accounts.
But its credit profile is looking brighter again. The company was upgraded by Moody’s to Ba1 with a positive outlook earlier last month, from Ba2, to reflect its improving credit profile and accelerated debt reduction, the agency said.
S&P also has a positive outlook on its BB+ rating.
Anglo American paper has subsequently recovered strongly. Its €750m 3.25% Apr 2023 bond is bid at a cash price of 106.05, compared with lows of 59 in January 2016, according to Tradeweb.
Anglo American 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.
Anglo conducted a liability management exercise last month to buy back more of its euro, sterling and US dollar notes in a bid to reduce its net debt.
Citigroup, Credit Suisse, Goldman Sachs, Morgan Stanley and UBS are active bookrunners on today’s deals.
BMO, Mizuho, Santander and SMBC are passive bookrunners. (Reporting By Laura Benitez, editing by Sudip Roy and Phillip Wright)