Daily Management Review

Australian mining giant Glencore and its partners looking to rejig their $3 billion debt


While exploring the refinancing of its debt, Glencore is also looking for ways to get out of this expensive project.

As per two creditors familiar with the matter at hand, mining giant Glencore along with its partners are set to restructure their debt of $3 billion which they owe to the world’s most expensive coal terminal in a bid to stave off a rapidly approaching deadline for the full repayment.

As per the terms of the loan, in the event of a refinancing failure, set for September 2018, Glencore and its four partners will have to pay the full amount by 2020.

As per sources familiar with the knowledge of the financing talks who spoke on the condition of anonymity, Wiggins Island Coal Export Terminal (WICET) proposed the restructuring of the debt to McGrathNicol, who represents the lenders.

Regular meetings have been scheduled until a deal is struck, said sources.

As per the creditors, a specific target of sustainable and tax-effective debt has yet to be decided, however this does not mean that there will be a trimming of the existing debt; furthermore, it will also not involve a haircut, for the coal miners, from the port’s expensive handling charge and cost recovery commitments.

“There’s a level of debt that this type of asset can sustain,” said one of the lenders. “So the idea is to repay it to a tax-effective level and then refinance the rest on commercial terms.”

As per the existing agreement, Glencore, New Hope Corp, China’s Yancoal, Wesfarmers and Baosteel’s arm Aquila Resources will have to shoulder all of the port’s debt and port fees for 27 million tonnes a year.

This means that they are paying around $25 per tonne of coal, which includes financing charges. This is nearly five times the $5 per tonne port fee that can be paid at the adjacent RG Tanna coal terminal.

If the restructuring effort were to fail, costs will rise even more and the miners will have to repay the debt over the next 10 years.

Glencore and the WICET group declined to comment.

In a development which further complicates this matter, Glencore has appointed Arnold Bloch Leibler, a law firm, to explore ways to cut its ties to the project; it has also hired Bank of America Merrill Lynch to find a buyer for its Rolleston mine, WICET’s largest contracted user.

Arnold Bloch Leibler declined to comment.

Wesfarmers has also said it is open to selling its Curragh coal mine, which is another partner of the port.


($1 = 1.2806 Australian dollars)





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