NEW YORK, Sept 10 (IFR) - Bonds of miner AngloGold Ashanti jumped a couple of points on Wednesday after the company announced plans to spin off its non-South African assets in a new British-based company.
The news sent the stock some 15% lower, as a US$2.1bn rights issue weighed on the equity.
But one investor told IFR it was a credit-positive move that would lessen exposure to South African mines that have been dogged by rising production costs and violent labor disputes.
“The cash from the rights issue will be used to pay down debt, taking leverage down about a turn to 0.9 times earnings from 1.9 times,” said Jon Brager, a high-yield analyst at Hermes Credit based in London.
AngloGold Ashanti’s 5.125% August 2022 bonds were bid at 100.5 by Wednesday afternoon, up from around 98 on Tuesday, he said.
“Longer term, the bonds are also going to be tied to the international company with no South African risk. The bonds potentially have more upside as the restructuring is executed, and the company could even be upgraded,” Brager said.
S&P rates the company at BB+, its top high-yield rating, while Moody’s gives it Baa3, the lowest investment-grade rating on its scale. (Reporting by Natalie Harrison; Editing by Marc Carnegie)