Moody’s assigns negative outlook to AngloGold Ashanti’s unsecured notes
The ratings agency, Moody’s has assigned a (P)Baa3, a negative outlook rating to AngloGold Ashanti’s notes, the agency says, July 25, 2013.
Moody’s says it assigned assigned a provisional (P)Baa3 senior unsecured rating to the proposed issue of unsecured and unsubordinated notes by AngloGold Ashanti Holdings plc (“AGAH”), a wholly-owned subsidiary of AngloGold Ashanti Limited (“AGA”).
“The notes will be fully and unconditionally guaranteed by AGA. The outlook is negative,” it says.
According to Moody’s, the proposed benchmark issuance of the senior unsecured notes will be used for general corporate purposes, which may include the repurchase or repayment of AGA’s $732.5 million convertible bond due May 2014 and the repayment of other indebtedness.
The placement of the new notes, it says will lead AGA to cancel its $750 million syndicated bridge loan facility, which was put in place to redeem the convertible bond.
“The (P)Baa3 rating of the proposed notes assumes that the final transaction documents will not be materially different from draft legal documentation reviewed by Moody’s to date and that these agreements are legally valid, binding and enforceable,” it says.
Among others, Moody’s argues that AGA’s Baa3 rating is supported by the company’s position as the third-largest gold producer globally, with a sizeable reserve base. It also positively reflects the company’s good geographic diversity, having 21 operations in 10 different countries and four separate continents.
The rating, Moody’s says also factors in AGA’s operating environment, which includes the event risk from negative developments in terms of higher taxes combined with the high political risk and weak institutional strength to which AGA is exposed to in a number of countries in which it operates.
“The ratings reflect that only in 2014 will AGA realise the full benefits of many of the measures it is taking to reduce its cash outflows in response to lower gold prices, and that these remedial steps may not be sufficient to stabilise operating margins and operating cash flow, especially if the gold price continues to decline,” it says.
By Emmanuel K. Dogbevi