The price of Teck Cominco B shares jumped 30% earlier this week on news that the company had deferred repayment of its US$4.0 billion senior term loan and US$5.8 billion senior bridge loan. That new agreements give the company some much-needed breathing space as it toils to pay down the cost of acquiring Fording Coal in the wake of the global financial meltdown.
Teck president and CEO Don Lindsay said the deal “… will give Teck the time to most effectively execute our asset sales program to significantly reduce our current debt and to access the debt capital markets to replace short-term debt obligations with longer term financing more appropriate to our portfolio of long-life assets.”
The lenders have agreed, on certain conditions, to 1) defer US$4.4 billion of payments previously scheduled for 2009; 2) extend the maturity date of US$3.5 of the bridge load for two years to Oct. 30, 2011; and 3) reschedule US$3.3 billion of amortization payments due on the term loan, with half of that amount payable in quarterly instalments during 2012.
Details of the interest rates and terms are available in the news release of April 21, 2009, posted at www.Teck.com.
This is very good news for Teck. The company has secured the breathing room it needs to execute a rational plan of asset sales rather than being forced to sell under duress. The rise in the stock price is a vote of confidence from investors in the quality of Don Lindsay’s leadership and a forward-thinking management team.