Advisory

Restructuring at the coal

face

Strictly Private
and Confidential
8 June 2016

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Introduction and who we are

Restructuring experts with recent experience in mining sector
Duncan Turner

Alistair Dick

Partner

Partner

Tel: +44 (0) 20 7804 7823

duncan.turner@uk.pwc.com

Tel: +44 (0) 20 7212 3533

alistair.dick@uk.pwc.com

Over 15 years restructuring experience

Often work on cross border situations with multiple
stakeholders
Recent sector experience includes:
Advising the board of New World Resources
Advising the lenders of London Mining Plc
Advising on the restructuring of Stemcor,
international commodities trader
Advising on a mine in Ukraine
Advising on a mine in Southern Africa
Other recent experiences include:
Advising the lenders of Royal Imtech NV in the
restructuring of 2bn of debt
Advising the board of Vestas Wind Systems on
the refinancing of 1.5bn of liabilities

Leads PwCs corporate financial restructuring team,

advising management teams, boards and
shareholders on financial restructuring
Previously head of debt advisory and restructuring
for Rothschild in Australia and SE Asia
Extensive mining experience including:
8 years as a mining lender in UK, Australia and
SE Asia
Advising bondholders to Mirabela Nickel on a
debt for equity swap
Advising on copper, coal and gold companies
on financings and restructurings
Currently advising a listed O&G company and PEowned mining related company on restructurings

Restructuring at the coal face

PwC

Strictly private and confidential

8 June 2016
2

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Commodity pricing since 2013

There has been a correlated downturn in several key commodities
Evolution of selected commodities (2013 - 2016)
160

Approximate
minimum
point Jan
2016

140

120

100

80

60

40

20

LME-Copper Grade A Cash U$/MT REB#(LCPCASH) U$

LME-Nickel Cash U$/MT REB#(LNICASH) U$

Steel Iron ore Fe62% AUS CIF China REB#(SHCNI62) U$

Gold Bullion LBM U$/Troy Ounce REB#(GOLDBLN) U$

London Platinum Free Market $/Troy oz REB#(PLATFRE) U$

LME-SHG Zinc 99.995% Cash U$/MT REB#(LZZCASH) U$

Coal Thermal API 8 China 1st Fut. - SETT. PRICE REB#(SCICLM1) U$

Restructuring at the coal face

PwC

Strictly private and confidential

8 June 2016
3

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Bond prices of selected miners

Traded down significantly since H2 2015
Bond prices for selected mining companies (2013 - 2016)

Merrill Lynch index of wider

corporate bonds (rebased)
120

100

80

60

Freeport McMoRan:
Anglo American:
Vale SA:
Noble Group:
Teck Resources:

$2bn (BB)
$0.75bn (BB)
$2.25bn (BBB-)
$1.18bn (BBB-)
$0.5bn (B+)

Period where bond prices

of mining companies have
underperformed versus
wider corporate bonds

40

20

Merrill Lynch Global Market Corporate bond index MERG0BC

Freeport-McMoRan Inc FCX 3.55 03/01/22

Anglo American PLC AALLN 2 3/4 06/07/19

Vale SA VALEBZ 4 3/8 01/11/22

Noble Group Ltd NOBLSP 6 3/4 01/29/20

Teck Resources Ltd TCKBCN 4 1/2 01/15/21

Restructuring at the coal face

PwC

Strictly private and confidential

8 June 2016
4

Miners subjected to rating downgrades

Coupled with increasing leverage

BBB+

BBB

Vale

Noble Group

35
7
30
6

5.6x,
25

BBB-

BB+

4
3.1x

2.9x

BB

20

2.6x,

3.2x
15

2.6x,

2.6x

2.2x,
BB1.4x
B+

10

1.6x

1.6x,

1.6x,
5

0.6x

0.4x,
2012

2013

2014

2015

2016

2012

2013

2014

2015

2016

2012

2013

2014

2015

2016

2012

2013

2014

2015

2016

Bond yield

Source S&P

Yield

A-

Freeport McMoRan

Investment grade

Anglo American

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Pressure points
One or more key factors can trigger a restructuring situation
Single Asset
financing

Operational
Liquidity
need

In ramp up/
operational
issues

Restructuring at the coal face

PwC

Strictly private and confidential

Highly
leveraged

Best to avoid

Debt maturity

8 June 2016
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Overview of options
Different routes are available to address balance sheet pressure

Closure/care and
maintenance

Cost Reduction

Consensual
restructuring

Asset sales

Options
Third party
investment

New funding
options

New equity

Restructuring at the coal face

PwC

Cut dividends

Strictly private and confidential

7

8 June 2016

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Themes coming out of recent restructurings

Not all solutions result in a permanent outcome

Position on cost
curve

Forum
shopping

New 3rd party

investment often
not part of solution
(yet)

Limited debt
trading

Each
situation
has its own
challenges

Eventual deal
often not an
end solution

Ongoing price
uncertainty
Government as
a stakeholder

Restructuring at the coal face

PwC

Strictly
8 private and confidential

8 June 2016

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How lenders can act in a restructuring

Sceptical of
market price
forecasts

Rarely want to
own asset

Security rights can

be limited or
imperfect

Restructuring at the coal face

PwC

Keen to avoid
crystallising a
loss

Strictly private and confidential

Limited ability to
trade out

Can put new

money in
(typically on a
super senior
basis)

8 June 2016
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Outlook

Further
restructurings likely

Restructuring at the coal face

PwC

Strictly private and confidential

Improving market
may encourage
more equity or third
party investment

8 June 2016
10

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