Metals Acquisition in an 8-K said it signed a syndicated facility agreement with several banks to provide funding for its acquisition of Glencore’s copper mine in Australia for $1.1 billion. The latest changes dramatically alter the scope and terms of the transaction since it was last adjusted in November, although the deal value remains the same.
Citibank, Bank of Montreal, Harris Bank N.A., The Bank of Nova Scotia, Australian Branch, and National Bank of Canada and Citisecurities Limited, as agent for the lenders, will provide a senior syndicate loan facility to finance, in part, the SPAC’s acquisition of Cobar Management Pty. Limited, which is a wholly owned subsidiary of Glencore Operations Australia andthe company’s interest in the Cornish, Scottish and Australian mine for up to $1.1 billion. Terms consistof $775 million up front cash consideration (with the potential to be scaled up to $875 million depending on equity demand) to Glencore, plus the combined company issuing up to 10 million shares to Glencore (with Glencore having the option to scale down to none if the SPAC raises sufficient equity), plus paying a $75 million deferred cash payment to Glencore tied to a future equity raise following completion. Terms further include two separate $75 million contingent payments to Glencore tied to future copper price thresholds, as well as a net smelter royalty pursuant to which Glencore would receive a royalty of 1.5% of all net smelter copper concentrate produced from the CSA Mine and associated approximately $31 million worth of transaction costs.
The agreement provides for three credit facilities:
A $205 million acquisition term loan (“Facility A”) that can be used to fund the business combination , requires quarterly repayments that are sculpted as necessary to meet a Debt Service Cover Ratio minimum of 1.50x but can be mandatorily repaid by way of a ‘sweep’ of excess cash;
A $25 million revolving credit facility (“Facility B”) that can be used only for general corporate purposes post-closing of the merger, and requires repayments such that all loans under Facility B are repaid on or before the date that is three years after the date of financial close, and
A $40 million (Australian) letter of credit facility (“Facility C”) that is for performance guarantees in favor of the government of New South Wales in relation to the environmental rehabilitation obligations of the CSA Mine and for other financial bank guarantees, as required.
At present Facility A and Facility B are fully committed, with Facility C not yet having received full commitments, but structured on the basis that a further lender can join the SFA to fund that Facility C.
All of the credit facilities require the combined company to maintain certain cash minimums and stay within specific debt ratios.
The Glencore mine annually produces between 41,000 and 49,000 tonnes of copper, a metal whose role in electric vehicle production has made it a coveted commodity.
The deal was announced nearly a year ago. With these latest amendments, the transaction is now structured more like a straight cash acquisition than a SPAC deal. Read more.
