February 17, 2016 / 10:50 AM / 4 years ago

LPC-Glencore to refinance short-term debt early, shares rise

LONDON (Reuters) - Mining and trade house Glencore Plc (GLEN.L) has raised $8.4 billion in commitments as part of an early refinancing of its short-term debt, sending its shares up as much as 12 percent on Wednesday.

The logo of commodities trader Glencore is pictured in front of the company's headquarters in Baar, Switzerland, September 30, 2015. REUTERS/Arnd Wiegmann - RTS2FYL

Glencore’s net debt of about $30 billion - one of the highest in the sector - was under scrutiny as multi-year prices for commodities such as copper and coal pressure its finances.

Markets have been concerned that Glencore’s high level of debt could compromise its ability to run its trading unit effectively, Bernstein analyst Paul Gait said.

Ratings agency Moody’s Investors Service downgraded Glencore’s credit rating to one notch above “junk” in December.

However, the company’s ability to secure debt in this environment had allayed some shareholder concerns, Investec analyst Marc Elliott said.

The company said it signed $7.7 billion of commitments to its new revolving credit facility, which will replace its existing $8.45 billion loan that was agreed last May.

The new loan was scaled back ahead of a launch of a wider syndication to a group of around 30 banks scheduled for the second quarter of 2016.

Wider syndication will be aimed at allowing banks that did not participate in senior syndication a chance to take part in the loan as well as scaling back commitments of the senior banks rather than securing incremental amounts for the loan, a source close to the deal said.

“At a time when the commodity sector is under close scrutiny in terms of its ability to weather the current storm, a bounce back and being in a position to honour borrowings suggest progress for Glencore,” said Mike van Dulken, head of research at Accendo Markets.

Pricing on the loan is in line with market expectations, with an overall all-in cost of below 100 basis points.

The financing is led by active bookrunners ABN AMRO, Bank of Tokyo-Mitsubishi UFJ, HSBC, ING and Santander.

Glencore said in December it had increased its current liquidity to more than $14 billion, meaning it did not require a facility of the same size as last year.

Shares in Glencore were trading up 10.3 percent at 113.50 pence at 1319 GMT in London, putting them at the top of the blue-chip FTSE 100 .FTSE. The shares are up more than 25 percent so far this year after falling some 70 percent in 2015.

Editing by Christopher Mangham, Susan Thomas and David Evans

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