Deals of the Year 2016: Corporate Finance Award Winner

Boldness and clear decision-making were the factors behind Anglo American's bond buyback and restructuring activity

Winner 2016 corporate finance: Anglo American

Feb TT DOTY logo

Anglo American returned to the markets this year in an impressive show of timing, knowledge and skill that impressed the judging panel in the Deals of the Year Awards. The mining company executed a unique corporate finance transaction that included a bond buyback cheaper than the original sale and secured a club revolving credit facility (RCF).

As part of its turnaround plan, the mining company was clear that it had to shake up its capital structure due to falling commodity prices.

With this unique transaction the group wanted to buy back debt trading, reduce gross debt and net interest costs, and muster a sign of strength at a time when markets were pricing in a high probability of default.

Anglo’s bonds had just been downgraded to junk status by the rating agency Moody’s, the day before the Johannesburg and London-based company announced an annual loss of $5.5bn and an intention to sell between $3bn and $4bn of assets.

 It was a very bold decision to consume liquidity at a time when most would be concerned to preserve it 

To the surprise of some observers, Anglo achieved its bond buyback goals with aplomb. Shortly following the transaction, a research note from Deutsche Bank said: “It would appear that they are indeed getting on with it…” as it recommended a very firm “hold”.

The group took advantage of outstanding bond cash prices at time of market uncertainty to repurchase $1.4bn of securities with maturities ranging from 2016 to 2018 and maintain the group’s liquidity by putting in place a three-bank $1.5bn club RCF.

Anglo also used $1.7bn of cash to retire $1.83bn of contractual repayment obligations, resulting in an immediate reduction in net debt of $130m, and $60m interest savings over two and a half years. No small feat for a group facing a difficult credit backdrop – Anglo credit default swap was around 1,000bps at the time of the launch.

The result of the complex transaction was that Anglo’s bond maturities were reduced by $250m, $680m and $900m for 2016, 2017 and 2018 respectively. It also reduced the group’s bond repayment obligations at original hedged rates to $1.4bn, $1.9bn and $2.5bn respectively for the same years.

One of the nominating banks said: “It was a very bold decision to consume liquidity at a time when most would be concerned to preserve it. Equally remarkable of the issuer to be able to get banks to commit significant additional capital to backstop the cash consumed, while both the share and bond prices were collapsing.

The treasury team showed the ability to move quickly to bring about the unexpected success of the European tranche. The initial facility was supposed to be for $1.05bn, but was increased by $450m to support the liquidity required to upsize the bond buyback transaction.

Feb 2017 TT Anglo American

What the judges said

“Their backs were against the wall. It was great treasury management – the standout deal of the sector”

Deal highlights

Issuer Anglo American

Amount $1.4bn bond buyback/$1.5bn club revolving credit facility

Structure Seven tranches

Rating (at time of deal) BB+ (Fitch), Ba2 (Moody’s), BB (S&P)

Currency and tenor $ £ €/2016/17/18

Interest rate/coupon 4.375% Dec 16/1.750% due Nov 17/6.875% due May 18/2.500% due Sep 18/2.625% due April 17/2.625% due Sep 17

Highly commended: Informa

Our judges also wanted to commend Informa for its corporate finance transaction. Informa went to market with a new acquisition bridge and backstop facilities to support the purchase of Penton Inc.

This acquisition was a transformative transaction for Informa, with new debt facilities successfully put in place within a short M&A time frame. The facilities were structured to de-risk 2017 funding requirements and included a mix of tranches to cover a number of purposes, including funding of consideration, backstopping upcoming debt capital markets maturities and backstopping core working capital facility.

The treasury team managed the bank financing process simultaneously with successfully executing a £715m equity raise (subsequently translated to US dollars to fund fixed US dollar consideration), and managing the M&A process. The major cross-border transaction was successfully completed within the proposed timeline and on proposed terms despite market volatility in light of the EU referendum decision.

About The Treasurer's Deals of the Year Awards

The Treasurer's Deals of the Year Awards recognise the outstanding work of treasurers, both within the treasury community and the wider business world. Through them we champion the success and achievements of treasury teams that have stood out in the market over the prior 12 months. Winning an award is a great way to strengthen your organisation's and your treasury's profile, bringing peer and industry acknowledgement. Find out more here.

Scroll to top