Glencore share price surges as company agrees $7.7bn credit refinancing

Glencore Plc (LON:GLEN) announced today it had agreed new loan commitments which will eventually replace the existing 12-month $8.45bn revolving credit facility (RCF), which the Swiss commodity trader agreed in May.

The company said that its 37 senior banks had filed loan commitments for $8.4bn, nearly $3bn above existing levels. However, Glencore decided to scale back the senior syndication arrangement, singing in $7.7bn of those commitments. A separate “general” syndication, which will allow up to 30 additional investors to participate in the RCF, is expected to follow suit in Q2 2016.
“Similar to the current facility being replaced in May, this new facility remains unsecured, containing a 12-month extension option and 12-month borrower’s term-out option, thereby extending the final maturity to May 2018,” Glencore said in today’s release. “There are no financial covenants in the RCF documentation.”

Pricing on the loan was in line with expectations, with an overall all-in cost of below 100 basis points over the Libor, Reuters reported, citing sources close to the company. This compares with 40-45bp over the Libor in last year’s arrangement, but analysts note that an uptick was expected in the context of the dramatic slump in commodities.
The refinancing “provides more concrete measures that Glencore is undertaking to consolidate its funding position,” RBC Capital said as quoted by the Financial Times. “A back of the envelope increase in interest charge for a 50 basis point increase (and we would expect a small increase following the deterioration in credit and commodity markets) would be about $10m per annum (and certainly not a business critical amount).”
Glencore uses the RCF to fund its extensive trading operations. Of the $8.45bn one-year RCF agreed last May, $6.6bn had been utilised by June 30. The company will reveal how much of the remainder has been spent as it reports full-year results on March 1.
Glencore’s share price had climbed 9.57 percent to a three-month peak of 112.80p as of 09:39 GMT today, leading the FTSE 100 rally. In the year-to-date, the stock has gained about 24 percent, which compares with a five-percent drop for the FTSE.
As of 09:47 GMT, Wednesday, 17 February, Glencore Xstrata PLC share price is 110.45p.