Brazil's Vale taps bond to retire debt
By Paul Kilby
NEW YORK, Aug 3 (IFR) - Brazilian miner Vale returned to the debt markets for a second time in a matter of months on Wednesday, approaching investors with a US$1bn 10-year offering to fund bond redemptions.
The mining giant, having seen its bond prices rally of late, also looked to be taking advantage of stronger iron ore prices and a renewed bid for Brazilian and emerging markets assets.
The company is highly exposed to China, where the growth in demand for iron ore is slowing down, meaning prices could well tumble in the second half of the year.
"Vale is being very savvy here," one New York-based trader told IFR. "They know there could be pricing pressures on iron ore in the second half of the year."
On the back of a modest US$3bn order book, the company launched a US$1bn deal at 6.25%, opting for size even as some observers thought fair value was closer to 6.125%.
But others had drawn the line at 6.25%, particularly as Brazil's headline risks remain significant and taking into account the fact that Vale sold US$1.25bn of debt in June.
"Below 6.25% didn't make much sense for a lot of accounts," said an investor.
"There seems to be some pricing sensitivities, which is normal considering how far the market has run and that Vale was in market just a few months ago." Continuación...