‘Glencore, partners eye US$3b debt rejig’

SYDNEY: Mining giant Glencore and its partners are proposing to repay part of US$3 billion (RM12.72 billion) owed on the world’s most expensive coal terminal, said two lenders familiar with the matter, in a bid to stave off a rapidly approaching deadline for full repayment.

If the refinancing fails to go ahead by next September, loan terms require Glencore and four remaining partners in Wiggins Island Coal Export Terminal (Wicet) on Australia’s east coast to pay off the full amount over the following decade.

Wicet first proposed the restructuring to the lenders’ representative, McGrathNicol, last week, according to the people.

However, the proposal does not involve a haircut on the senior debt, nor would it release 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.”

Wicet was a boom-time port plan agreed in 2009 and completed late last year at Gladstone to service a consortium of eight Bowen Basin coal producers.

But three out of the eight original partners have folded over the past two years, hit by a prolonged slump in coal prices worsened by the burden of paying “take-orpay” port fees for anticipated volumes that they were never able to produce.

Under the Wicet agreement, the remaining five partners — Glencore, Wesfarmers, New Hope Corp and China’s Yancoal and Baosteel arm Aquila Resources — have to shoulder all of the port’s debt and port fees for 27 million tonnes a year.

That means they are now paying about US$25 per tonne of coal, including financing charges — about five times the US$5 per tonne port fee at the adjacent RG Tanna coal terminal. Reuters