- GRail made A$100 mln in EBITDA last year
- Recent infrastructure sales at 11-15 times EBITDA
- Glencore aims to cut net debt to $17-18 bln in 2016
(Adds details on GRail, deal timing)
Glencore Plc
said on Thursday it has put its coal trains in Australia up for sale, hoping to fetch as much as A$1.5 billion ($1.1 billion) as it taps into a hot market for infrastructure to cut debt. The Swiss-based mining and trading giant is looking to slash net debt this year by around $8 billion to help it weather what is expected to be a prolonged downturn in all its commodities markets.
The fleet it has put up for sale, called GRail, owns nine trains and hauls most of Glencore's 51 million tonnes a year of coal produced in the Hunter Valley to the port of Newcastle on the east coast.
"Glencore is confident of fetching a sale price of above A$1 billion based on recent infrastructure sales in Australia," the company's Australian spokesman, Francis De Rosa, said.
That estimate is based on the fact that GRail made A$100 million in earnings before interest, tax, depreciation and amortisation (EBITDA) in 2015 and recent Australian infrastructure sales have been sealed at 11-15 times EBITDA.
Those earnings multiples are much better than any mine sale could obtain in today's depressed market.
GRail competes with Aurizon Holdings (AZJ) and Asciano Ltd's (AIO) Pacific National, which is set to be taken over by China Investment Corp [CIC.UL], Canadian Pension Plan Investment Board and U.S. investor Global Infrastructure Partners.
Glencore is being advised by RBC, two people familiar with the process said.
RBC is sounding out interest from infrastructure funds and pension funds, aiming to get the sale process moving in mid-April. Glencore hopes to close a deal by September.
The final sale price will hinge on the charge Glencore negotiates for hauling its coal on GRail after it is sold. The higher the charge, the higher the price tag Glencore will seek.
The planned sale of GRail was first reported by the Australian Financial Review.
($1 = 1.3263 Australian dollars)
