Does Rio Tinto know something the rest of us, with the possible exception of Twiggy Forrest from Fortescue, are not aware of?
Rio have launched another buyback and up to USD$3 billion (AUD$3.95 billion) of Rio bonds will be redeemed early or bought back, according to the company’s latest offer.
The buyback comprises two parts; one is the early redemption of 2017 and 2018 bonds and the other is the “Cash Tender Offer” for a range of bonds issued by Rio Tinto Finance (USA) plc with maturities between 2019 and 2022. The redemption date has been set for 26 October 2016 but the overall offer closes 24 October 2016 (New York time), unless extended. A 3% bonus will be paid as an added incentive for bond holders who successfully tender their bond holdings prior to 7 October 2016.
This is Rio’s third buy back for 2016. The previous two buybacks were completed in May and July and were worth USD$1.5 billion and USD$1.7 billion respectively. Perhaps it is a little early to be calling a trend but it seems as if the “nips are getting bigger”, or so the popular Australian song goes. It is tempting to think Rio knows something about corporate bonds yields the rest of us don’t know. However, given the company’s poor record in buying assets over the last decade perhaps a more cynical view would be to ask if they are ringing the bell for a rise in bond yields?