The Newswire

Your daily serving of financial goodness

RIO Tinto to Reduce Gross Debt through June Tender Offers

RIO Tinto to Reduce Gross Debt through June Tender Offers
The offer was oversubscribed at 5pm, New York City time, on the 20th of June 2016, whereupon $1.25 billion of maximum tender securities will be purchased.
Jun 22, 2016 By Kaivalya Kandarpa Tags: RIO

Iron ore giant Rio Tinto (ASX:RIO) is aiming to reduce gross debt by $3 billion, through their acceptance in purchasing a total of $1.252 billion of debt under its ‘Maximum Tender Offer’, along with $1.748 billion under its ‘Any and All Other Offer’.

Maximum Tender Offer

The offer was oversubscribed at 5pm, New York City time, on the 20th of June 2016, whereupon $1.25 billion of maximum tender securities will be purchased.

The maximum tender offer commenced on the 7th of June 2016, with expiration on the 5th of July 2016. Under the offer, the following will be purchased: $487.6 million in aggregate principal amount of Rio Tinto Finance (USA), 3.50% notes due 2020, $337.9 million in aggregate principal amount, 4.125% notes due 2021, along with $400.8 million in aggregate principal amount, 3.75% notes due 2021, $11.5 million 3.50% notes due 2022, and $14.6 million 2.875% notes due 2022.

Following the purchase of the securities under the offer, they will be retired and cancelled, thus no longer remain outstanding.
For each of the given securities, the reference yield and maximum tender total consideration will be determined on the 21st of June 2016 at 11am, New York City time, under the terminology stipulated in the offer to purchase.

Why is Rio Launching the Cash Tender Offer?

On 7 June 2016 Rio announced the new cash tender offer for up to $3 billion for its 2018-2022 notes. The cash tender offer is a capital management incentive as Rio is using its “strong cash position” to repay debt early. Earlier this year, Rio already repurchased $1.5 billion of its 2017 and 2018 notes.

A company may elect to purchase debt earlier if they have surplus cash sitting in the bank or if management believes it will strengthen the company’s balance sheet. There are a number of factors that play a role, such as future expectations or the company’s cash position. Essentially management believes that the net benefits of reducing debt will be positive overall.

Appointment of New CEO

In accordance with its new organisational structure, Rio Tinto has appointed Jean-Sebastian Jacques as its new CEO, replacing retiring CEO Sam Walsh in the process.

Under Jacques, there have been some changes, with regards to the company’s management.

Current acting Copper and Coal chief executive Chris Salisbury, will become Iron ore chief executive based in Perth. Additionally, current Aluminium Primary Metal President and CEO Arnaud Soirat will join the executive committee as Copper and Diamonds chief executive. Current Technology and Innovation Group Executive Stephen McIntosh, will take on the role of Growth and Innovation Group Executive, being based in Brisbane.   

As at 11.30am (AEDT), RIO is up 1.27%, to $44.77.

 

Share this article

Kaivalya Kandarpa Author: Kaivalya Kandarpa Jun 22, 2016

Kaivalya is an equity analyst and a client advisor at Wise-owl. She specialises in fundamental and technical analysis for large and mid-cap companies. Having completed her bachelor's degree in Business Administration majoring in Finance, Kaivalya has a comprehensive understanding of international stock market movements. She tracks local and overseas markets and compiles analytical reports for various industries.

Frontier Diamonds a rare gem for ASX investors?

Diamonds were a scarce resource until 1866 when the first discovery of the Eureka Diamond near Hopetown, South Africa sparked a dramatic increase in global production of gemstones

Author: Simon Herrmann Nov 22, 2017

Errors

Sign Up for Free Trial
Subscribe
Recent Tweets
Recent News