London, England — MININGREVIEW.COM — 22 August 2008 – Swiss-based international miner Xstrata plc is negotiating with various banks for a US$15-billion (R112.5 billion) loan to fund its planned $10-billion (R75 billion) hostile takeover of South Africa-focused Lonmin – the world’s third-largest platinum miner.
Quoting senior banking sources, Reuters reports that Xstrata has approached 22 banks to make large commitments and give pricing indications on the loan, with the aim of putting together a club of senior banks to fund the deal at the top level.
The report adds that Xstrata has asked for a larger loan than the estimated US10 billion originally anticipated, in order to re-finance Xstrata and Lonmin’s existing debt, as well as the acquisition.
Lonmin has rejected Xstrata’s offer of 3 300 pence a share, which was 42% more than Lonmin’s closing share price on 5 August – the day before Xstrata made its proposal. Chairman Sir John Craven came out strongly against the bid, calling it too low and opportunistic.
“This pre-conditional offer fails to recognise our growth potential, given both the ounces we have in the ground and the long-term demand for PGMs in the future,” he added. “It is not in the interests of our shareholders and the board will continue to oppose it vigorously.”
Reuters reports that banks are, however, proving reluctant to underwriting risk and are finding it difficult to make large commitments, given cash constraints and high funding costs. They are opting to make smaller, more clearly defined “take and hold” commitments of around US$1-billion (R7.5 billion) each.
"”Such commitments are still quite a lot,” a banker told the news agency, “but there will be pressure from the senior banks to launch the deal to a wider syndication.”