As contagion swept through the eurozone and Chinese trade data
reinforced impressions that the powerhouse economy is cooling
off, BHP Billiton this week priced €2 billion-worth ($2.55
billion) of bonds under a medium-term note programme, which
will raise €20 billion overall.
The six-year and twelve-year bonds
2.125% and 3% respectively, while its US ten-year notes issued
in February yield 2.875%, a rate that many sovereign nations
would have cause to envy, as the chart from the Trading Economics website
It comes as little surprise that the enfants terribles
of the eurozone family are seen as far riskier debtors than
BHP, which has in recent weeks signalled its intention to curb spending
But even Australia, which was one of the only western nations
not plunged into recession as the global financial crisis
struck, borrows at a higher rate than the miner to which it
Hotline, who cannot remember the last metal market story he
wrote that did not mention China, also views it as a little
peculiar that the Asian economy borrows at a higher rate than
As Ernst & Young said in a piece for Metal
, large-cap miners are enjoying such favourable
rates in the bond markets that equity financing has largely
become unnecessary - which may provide some small relief to
exploration-stage miners that would struggle to compete with
the likes of BHP for nervous equity investors' cash.
BHP ceo Marius Kloppers is keen to preserve the company's
impressive standing in debt markets, as well its favourable
credit ratings. Its stable long-term A+ and A1 ratings from
Standard & Poor's and Moody's, respectively, are among the
highest awarded in the mining segment.
BHP's large-cap peers have equally seen their standing in debt
markets grow surer in recent years as they have used cash from
stronger, higher-priced sales to reduce leverage, buy back
shares, and reinvest in assets that will allow them to remain
their competitive positions globally.
Freeport McMoran, for example, recently issued three tranches
of debt totalling $3 billion, the most costly of which yields
That money, in turn, was used to fund the early redemption of
older bonds that paid out 8.75%, a rather more onerous rate
that did not reflect the fact that miners now are in ruder
financial health than most of the countries they are mining in,
and not far off some of the countries they are listed in.
The comparison only takes you so far, of course.
Those seeking security in an uncertain world cannot, as yet,
emigrate to BHP Billiton.