Rio Tinto Plans to Buy Back $1.5 Billion in Debt -Update

By Alex MacDonald

LONDON--Mining giant Rio Tinto PLC(RIO.LN) said Thursday it has launched cash tenders to buy back up to $1.5 billion of debt due in 2017 and 2018, joining other mining and metals companies in using their cash piles to pare debt amid a protracted commodities price downturn.

The tenders are expected to close in May depending on whether certain conditions are met.

Rio Tinto, the world's second largest diversified miner by market value, said it will first offer to buy up $1.5 billion of the $1.75 billion notes due in 2017.

If it fails to spend all of the allotted $1.5 billion on those notes, it will use whatever money is left over to buy the 2018 notes, which have a total value of $3 billion.

Other mining and metals companies have also tried to buy back their debt, with mixed results. Last month Anglo American, the world's fifth-largest diversified miner, used $1.7 billion to retire $1.8 billion in obligations related to U.S. and euro bonds.

This week, ArcelorMittal (MT), the world's largest steelmaker, reported that it only been able to spend $1.1 billion of the $3.2 billion it had set aside to buy notes maturing in 2017 and 2018.

Analysts at Kepler Cheuvreux credit research said in a note Tuseday that the low turnout signalled investors' preference to hold on to their relatively higher -yielding ArcelorMittal bonds given the general lack of yield in the euro corporate bond market.

Rio Tinto's 2017 note tranches of $500 million and $1.25 billion have annual coupons of 2% and 1.625% respectively while the 2018 notes of $1.75 billion and $1.25 billion have coupons of 6.5% and 2.25% respectively.

-Tasos Vossos in London contributed to this story

-Write to Alex MacDonald at [e-mail]

(END) Dow Jones Newswires

April 21, 2016 13:00 ET (17:00 GMT)

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