Vale Said to Sign $1 Billion Bank Funding Backed by Glencore – by Javier Blas and R.T. Watson (Bloomberg News – September 15, 2016)

Vale SA borrowed $1 billion from a global assembly of banks, guaranteeing it with iron-ore shipments to Glencore Plc, people with knowledge said, in an arrangement that shows the cash squeeze faced by miners.

The world’s top iron-ore producer signed the so-called pre-export financing, which has a maturity of two and a half years, in June, the same people said, asking not to be named because the information is private.

Vale, which draws most of its revenue from Brazilian iron-ore mines, has suffered as the price of the steel-making commodity plunged and its debt ballooned. From a peak of $192 a metric ton in early 2011, iron ore prices fell to $38 in late 2015. Since then, prices have recovered to about $56.

Glencore, which will receive the iron-ore cargoes that guarantee the deal, has minimal exposure to the loan, with a syndicate of banks taking the bulk of the financing, according to two people familiar with the structure of the deal.

The trading house disclosed in its half-year earnings report it had advanced to an unnamed iron-ore counter-party $400 million as of June 30, of which $40 million was its own money and $360 million was provided by the “bank market.” The unnamed party was Vale, two of the people said. Both Vale and Glencore declined to comment.

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