Brazil's Vale sets sights on medium-term debt after heavy divestments
December 6, 2017 |
Fresh from the Nacala project financing and Cubatao fertilizer sale, the miner shifts focus to its 2021 and 2022 liabilities, talks more LM exercises in the New Year
Vale aims to retire its 2021 and 2022 debt, prioritizing potential liability management exercises in the New Year, the company CFO told journalists at an event in New York.
According to an investor presentation, the Brazilian miner has roughly $25.2bn in gross debt, of which 72% matures beyond 2020.
"Our profile is irregular, with a lot maturing in 2021 and 2022... The focus is on retiring 21 and 22 debt," Luciano Siani said at Vale Day held at the NYSE.
After these two years until 2030, Vale has very little maturing debt and Siani said "this space has to be filled."
Regarding new, longer-tenored, bond issues, Vale is confident its credit profile will evolve and the miner remains reluctant to issue fresh debt maturing beyond 2030. Siani said Vale would rather await a potential ratings upgrade, rather than lock in rates amid today's market conditions.
"If we issued a 30-year today, even at today's rates, it would not be optimal," he said. "There are no new issue plans, the focus is on retiring short-term debt."
Fitch Ratings bumped Vale a notch to BBB+ in October.
Vale's net debt-to-EBITDA decreased to 1.3x at the end of Q3 this year, down from 3x during the same period in 2016. Current capex stood at $863m in September, compared to $1.157bn at the same point last year.
In September, Ba2/BBB-/BBB+ rated Vale completed a tender offer for $489m of the outstanding $750m it has in 4.625% 2020s. In March, the company redeemed €750m in 4.375% 2018 euro-denominated paper.
It tacked on a further $1bn to its 6.25% 2026s back in February, taking advantage of favorable issuer conditions at the time.
Last month, Vale and Mitsui signed a 14-year $2.7bn project financing package for the Nacala Logistics Corridor in Mozambique.
Roughly three years ago, the Brazilian miner aimed to sell portions of its share capital in the African projects to Mitsui. Following a drop in coal prices, however, terms were revised in October last year and agreed in March.
Company CEO and president, Fabio Schvartsman, said at the same event that Vale, now had a "meaningful" net free operational cash flow. He also expected this to persist through 2018 and 2019, negating the need to sell large-scale assets.
"There are a few small non-core assets... Over time we are going to sell all of them," he said. "Not something meaningful, nobody will even notice the sale, nothing like Nacala or the fertilizers business."
Vale could net up to $1.5bn from these non-core asset sales over the next three years. This includes stakes in Brazilian bauxite producer Mineracao Rio do Norte, Australia-based coal project Eagle Downs and California Steel Industries.
Last month, Vale agreed to sell the Cubatao Fertilizantes complex to Norwegian agribusiness Yara International for $255m.
"More than anything, over the next several years, we will have big net cash flows, measuring in the 10s of millions," Schvartsman said. "To delever, we can use the operational cash flow... We do not need to look to sell things."