Samarco Reduces Size of Club Deal

Samarco has cut the size of its 7-year club loan to $335m from the $400m after the Brazilian iron ore miner expressed an unwillingness to budge on pricing, say bankers. Banks were not heard dropping out of the transaction, but were thought to be unwilling to increase ticket sizes at the final margin of 150bp over Libor. “At that spread and tenor the banks that came in to the deal were not willing to commit $100m each, so the ticket sizes were reduced,” says one syndicated loans banker involved in the transaction. In the end, HSBC and WestLB joined Bank of Tokyo Mitsubishi, Mizuho and SMBC, each participating with $67m tickets. The transaction is in documentation and is expected to close at the end of this month. Samarco, which is jointly owned by Vale and BHP Billiton, had originally asked for proposals on 7 and 10-year tenors, but the latter option was seen as far too ambitious, at least for international lenders. The world’s second-largest exporter of iron ore pellets closed a $400m 5-year club deal in December. BNP, HSBC, ING, RBS and SMBC committed $80m each, at a spread of 160bp over Libor. That loan was for general corporate purposes, and for funding a $3bn expansion plan for 2011.