Nyrstar Bonds Decline With Zinc Prices on Refinancing Concerns

(Bloomberg) -- Nyrstar NV bonds fell to the lowest in more than two years as slumping zinc prices fuel investor concerns the company will struggle to refinance debt maturing next year. The miner’s 350 million euros ($408 million) of bonds due in September 2019 dropped to 96 cents on the euro on Friday from 102 cents on July 6, according to data compiled by Bloomberg. The notes yield more than 12 percent, up from less than 7 percent earlier this month.

“The bond maturing in September 2019 was not so long ago something that was likely to be refinanced by an issuance of new bonds,” said Marc Pierron, a senior credit analyst at Spread Research in Paris. “At today’s pricing that would be very difficult.”

Nyrstar is grappling with more than $1 billion of debt accumulated through ill-fated acquisitions at the peak of the mining supercycle. Zinc slumped to the lowest level since June 2017 this month, as signs of a slowdown in China’s economy reinforced fears that a trade war would drag down global growth just as new supply hits the market from Australia and South Africa.

“If the zinc price drops even lower, that could be a problem for Nyrstar,” said Felix Fischer, global head of research at Lucror Analytics in Singapore. “Their ability to tap on some of their credit facilities would decrease because some of them depend on the value of Nyrstar’s inventory.” ABN Amro analysts warned last month that there’s a risk of Nyrstar becoming a “zombie company” as almost all its incoming cash will have to be used to service debt.

In May, Nyrstar ruled out raising equity to refinance maturing debt and said it would instead seek additional prepay agreements for its metal production. It signed a new agreement with Trafigura Pte Ltd., one of the world’s largest commodities traders, refinancing an earlier facility and boosting finances by $63 million.

A spokeswoman declined further comment on the agreement, citing a quiet period before Nyrstar reports earnings next
month.

“The company management ruled out equity issuance earlier this year but the bond yields were much lower then,” Pierron said.

 

July 27, 2018, 07:38:03.271 GMT

By Karoliina Liimatainen; Edited by Shelley Robinson, Chris Vellacott, and Abigail Moses