The mining group Xstrata yesterday unveiled plans to raise $600m (£373m) by selling bonds which can be converted into shares in the company in a move to cut the cost of its debt.
Trevor Reid, Xstrata's finance director, said the move achieved "a number" of financing objectives, including diversifying the company's funding base. It also extended "the maturity profile of the group's debt" and reduced the cost of the bank financing facility put in place at the time of the acquisition of Australia's MIM in June for $2bn. After the purchase, Xstrata had about £2.4bn of debt.
The bonds, which mature in 2010, will pay a coupon of 3.95 per cent and can be converted at £6.10 - a premium of 39.6 per cent over Xstrata's shares on Friday. "It's pretty opportunistic. The outlook for commodities looks pretty good against the US interest rate picture so now is a good time to do it," a spokesman said.
Its shares fell 3.8 per cent to 421p. Analysts estimated that the maximum earnings dilution would be 5 per cent if there was 100 per cent conversion.Reuse content