[miningmx.com] – AngloGold Ashanti is wasting no time putting the $820m it has just received from the sale of the Cripple Creek & Victor mine to good use with an offer to repurchase up to $810m of its outstanding 8.5% notes due in 2020.
AngloGold holds an option to repurchase them in July next year at a call price of 106.375c in the dollar but is offering to redeem them now in a move which could save the group up to $69m in interest charges over the next year.
That would be more than the $61m the group made in headline earnings for the six months to end-June and around double the $31m in free cash inflow that the group recorded during that period.
The aim is to use available cash sitting in the balance sheet but earning little interest to get rid of debt costing the group 8.5% in interest annually.
According to CFO Christine Ramon, “this is another decisive step forward in our strategy of cutting debt and reducing our interest bill in order to improve free cash flow. “
The bond currently trades at 103.25c in the dollar. AngloGold has offered to buy it back at 104.5c in the dollar but with an added incentive to repurchase at 107.5c in the dollar if the bonds are tendered during the first ten days for which the offer is open.
According to a research note published by Goldman Sachs “this is positive news for the stock and is in line with management’s earlier statements that it would target debt portfolio optimisation.
“AngloGold will continue to have significant liquidity available – around $1.1bn in revolving credit facilities and $400m of cash – which we believe may be a sufficient cushion in the current gold price environment.
“We think that an earlier than expected redemption of the high yield bonds in AngloGold’s debt portfolio, if fully subscribed, would be an additional incremental positive for its equity investment case.’
