BHP announced its long awaited multi-currency hybrid issue and in a stunning result, bids topped a massive $19bn. The huge demand demonstrated the power of the world’s pre-eminent mining company to tap markets for debt funding with the final issue size being just over $8.8bn in AUD terms. While the issue is not a domestic Australian issue, it dwarfs the three tranche Australian Apple bond issue in August that was worth AUD$2.25bn.
BHP issued a number of tranches of hybrid securities worth USD$3.25bn (AUD$4.45bn) in the US debt market, €2.0bn (AUD$3.14bn) in the European debt market and another ₤600M pounds (AUD$1.27bn) in the sterling debt market.
Final details on the USD tranches have not been made available as at the time of writing but YieldReport understands this part of the capital raising is made of two fixed-rate notes, one with a 6.25% coupon and the other with a 6.75% coupon. If they are similar to the euro and sterling denominated notes, they will have a non-call period of around 5-9 years and a final maturity date around sixty years from now.
There are two euro-denominated tranches for a total of €2.0bn. The larger tranche is worth €1.25bn and comprises 4.75% fixed-rate reset notes which matures in 60.5 years and has a non-call period of 5.5 years. The balance is a €750m tranche of 5.625% fixed-rate reset notes which matures in 64 years and has a non-call period of 9 years. The sterling denominated tranche is worth ₤600m, has a coupon of 6.5%, matures in 62 years and has a non-call period of 7 years.
The hybrid securities are not convertible into shares but are an equity-like debt instrument that are being increasingly preferred by companies because they satisfy ratings agency capital demands.
The issue was flagged in the last week of September but a huge commodity sell-off, started by an analyst report on the mining and trading house Glencore, would appear to have delayed the issue.
BHP had originally looked to sell around $5 billion in bonds but demand has been sufficiently strong to increase the size significantly and tighten the pricing from initial guidance. Pricing on the smaller euro tranche is understood to have fallen 25bps from 5.875%.
The last recent bond issue from BHP was in late April when it issued €2bn of bonds in three tranches of debt with maturities in 2020, 2022 and 2030. Those tranches had coupons of Eurobor + 35bps, 0.75% and 1.50% respectively.
BHP is currently rated A+ by Standard & Poor’s and A1 by Moody’s Investors Service although Commonwealth Bank recently said it expects a downgrade for the miner in 2016.