BHP takes advantage of low rates
BHP Billiton, the world’s biggest mining company, on Wednesday priced $5bn of notes in its biggest debt raising in more than 18 months, as relative yields on mining bonds in the US were near the lowest level since June.
The four-part transaction follows a ¤750m note sale in April and a C$750m deal by the Melbourne-based company in May, Bloomberg-compiled data show. BHP last sold into the US market in February last year, when it priced $5.25bn of debt in a five-part sale.
BHP, which has a $16bn capital spending programme for financial 2014, follows Glencore Xstrata, Rio Tinto and AngloGold Ashanti in selling new bonds since June as producers seize on low yields and optimism for the long-term outlook for commodities in China and other markets.
The average yield premium in a Bank of America Merrill Lynch index of US mining and metals bonds touched 232 basis points this week, a level unseen since June 5. “High-quality corporates are getting good-sized issuance away at the moment,” said Ben Byrne, a credit sector specialist at Citigroup in Sydney.
Glencore said this month it was selling ¤750m of seven-year notes in its first debt sale in the currency since November, while Rio Tinto sold $3bn of dollar-debt in June.
BHP issued $500m of threeyear, floating-rate notes to yield 25 basis points more than the threemonth London interbank offered rate and the same amount of 2.05%, five-year debentures to yield 70 basis points more than similar-maturity Treasuries, according to data compiled by Bloomberg. The company’s finance unit also sold $1.5bn of 3.85%, 10-year debt at a relative yield of 125 basis points and $2.5bn of 5%, 30-year securities at a 130 basis-point spread.
The producer sought to tap demand for longer-dated paper, with the 30-year component of yesterday’s BHP sale making up half the total bond transaction. Just 19% of the February 2012 multi-part deal was sold as 30year debt.
BHP’s 2012 30-year US dollar debt sale was priced to yield 102 basis points more than treasuries, 28 basis points less than yesterday’s transaction.
The yield premium over sovereign securities on the February 2042 notes jumped 10 basis points yesterday to 111, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
“The 30-year tranche was interesting, they certainly hit that one in size,” said Michael Bush, head of credit research at National Australia Bank in Melbourne. “When you look at it on the curve, to me that 30-year pricing still looks pretty attractive.”
BHP, which is rated A1 at Moody’s Investors Service and A+ by Standard & Poor’s and Fitch Ratings, said it would use proceeds from the bond sales “for general corporate purposes”.
Barclays, Goldman Sachs Group and JPMorgan Chase & Company managed the offering.
Sales of corporate bonds in the US reached a record high this month, with phone companies Verizon Communications and Sprint leading offerings of about $193.7bn. Verizon issued $49bn on September 11 in the biggest corporate bond deal ever while Overland Park, Kansas-based Sprint raised $6.5bn on September 4 in the largest high-yield sale since 2008. Offerings broke the previous monthly record of $177.3bn set in September last year.