Lodes of money
Global diversified natural resources company Glencore Xstrata’s US$17.34bn loan, which was signed in June 2013 was not only the largest general corporate purpose loan in the EMEA region for more than five years; it was also an all too rare example of a genuinely syndicated transaction in a market dominated by club deals.
The merger of Glencore and Xstrata in May 2013 called for the creation of a new financing structure to replace the two companies’ existing facilities and match the needs of the enlarged group.
Active bookrunners Barclays Bank, Commerzbank, Royal Bank of Scotland, Societe Generale and Santander were appointed to arrange the deal, with Royal Bank of Scotland as global co-ordinator.
Time-wise, the deal had to fit into a tight second-quarter window before the end of June when Glencore’s short-term revolving credit was set to mature, but also after the merger took place.
“This was something entirely new and at a difficult time in the market. Failure was not an option,” said Roland Boehm, global head debt capital markets at Commerzbank.
The deal was launched into senior syndication in early April for an initial amount of US$12bn with 29 banks committing to US$500m tickets, providing critical momentum ahead of the launch of general syndication on April 30. Five ticket levels were offered in general, ranging from US$25m to US$350m, split over the one and three-year facilities.
The deal raised nearly US$20bn from 80 banks, including 10 lenders from the Middle East and 17 lenders from Asia-Pacific, and was increased to US$17.34bn.
“It was a classic, very broad and wide syndication that hasn’t been matched in recent years,” said Graham Lofts, head of international loan origination at Commerzbank.
The loan appealed to a wide range of banks because it carried a unique hybrid structure to combine elements of commodity trader-style syndication through one and three-year facilities totalling US$13bn, and a typical mining sector-style syndication through a five-year US$4.35bn facility.
The deal carried an innovative reverse yield curve pricing structure that saw the undrawn five-year facility pay a lower margin of 85bp than the 90bp on the three-year facility. Meanwhile, the one-year facilities paid margins of 80bp.
The deal also featured the first utilisation fee structure seen on a commodity sector financing, on the three and five-year facilities, helping to keep margins down on undrawn funds. Notably, pricing levels and the utilisation fee structure were replicated on Swiss energy trader Vitol’s US$7bn loan refinancing in October 2013.
“It was the best deal for the client, while also working for the market and introducing innovation,” said Jonathan Pughe, head of EMEA loan syndicate and sales markets at RBS.
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