Glencore Plc and its partners in the Queensland, Australia-based Wiggins Island Coal Export Terminal have proposed to partially repay US$3 billion of debt to stave off a fast-approaching full repayment deadline, Reuters reported Oct. 6, citing two lenders familiar with the matter.
In the event a refinancing fails to materialize by September 2018, the loan terms call for Glencore and four other partners in the terminal to pay the loan in full over the next ten years.
Wiggins Island Coal Export Terminal, or WICET, presented the proposal to lenders' representatives McGrathNicol last week, and regulator meetings will continue until an agreement is reached, according to the report.
According to a September report, Glencore tabled a loan restructuring proposal that suggested lenders take a haircut of up to 30 cents on the dollar on their US$2.8 billion exposure in exchange for Glencore's continued support as the biggest port user.
However, the latest proposal does not include a cut on the senior debt or the release of coal miners from port handling fees and cost-recovering commitments.
"There's a level of debt that this type of asset can sustain … So the idea is to repay it to a tax-effective level and then refinance the rest on commercial terms," one of the lenders told the newswire.
WICET was established in 2009, and its construction was completed in late 2016. Its aim was to serve a group of eight Bowen Basin coal miners. But three of the eight original members have gone under due to a downturn in coal prices, as well as the take-or-pay port fees attached to anticipated volumes they were unable to produce.
Now, the five remaining partners, comprising Glencore, Wesfarmers Ltd., New Hope Corp. Ltd., Yancoal Australia Ltd. and Aquila Resources Inc. would have to take the port's debt obligations and the higher fees for the 27 million-tonne-per-year volume committed under the WICET agreement.
According to Reuters, Glencore has hired Arnold Bloch Leibler to find ways to cut its links with WICET. The Switzerland-headquartered commodities trader also appointed Bank of America Merrill Lynch to find a buyer for its Rolleston open cut coal mine, which is the terminal's largest user.