By Paulina Duran and James Regan
SYDNEY (Reuters) - Mining giant Glencore and its partners are proposing to repay part of $3 billion owed on the world's most expensive coal terminal, two lenders familiar with the matter said, in a bid to stave off a rapidly approaching deadline for full repayment.
If the refinancing fails to go ahead by next September, loan terms require Glencore and four remaining partners in Wiggins Island Coal Export Terminal (WICET) on Australia's east coast to pay off the full amount over the following decade.
WICET first proposed the restructuring to the lenders' representative, McGrathNicol, last week, according to the people, who have knowledge of the financing talks but declined to be identified because negotiations were confidential. Regular meetings will continue until a deal can be struck, they said.
A specific target of sustainable and tax-effective debt has yet to be decided, the lenders said. However, the proposal does not involve a haircut on the senior debt, nor would it release the coal miners from the port's expensive handling charge and cost recovery commitments.
"There's a level of debt that this type of asset can sustain," one of the lenders told Reuters. "So the idea is to repay it to a tax-effective level and then refinance the rest on commercial terms."
WICET was a boom-time port plan agreed in 2009 and completed late last year at Gladstone to service a consortium of eight Bowen Basin coal producers.
But three out of the eight original partners have folded over the past two years, hit by a prolonged slump in coal prices worsened by the burden of paying "take-or-pay" port fees for anticipated volumes that they were never able to produce.
Under the WICET agreement, the remaining five partners - Glencore, Wesfarmers, New Hope Corp and China's Yancoal and Baosteel arm Aquila Resources - have to shoulder all of the port's debt and port fees for 27 million tonnes a year.
That means they are now paying about $25 per tonne of coal, including financing charges - about five times the $5 per tonne port fee at the adjacent RG Tanna coal terminal. If the restructuring fails, that cost will increase, as the miners are then bound to repay their debt over the next 10 years.
The WICET group and Glencore declined to comment.
Complicating matters, Glencore has appointed law firm Arnold Bloch Leibler to explore ways to cut its ties to the project and hired Bank of America Merrill Lynch to find a buyer for its Rolleston mine, WICET's largest contracted user.
Arnold Bloch Leibler declined to comment.
Meanwhile Wesfarmers has also said it is open to selling its Curragh coal mine, another partner of the port.
($1 = 1.2806 Australian dollars)
(Reporting by Paulina Duran and James Regan in SYDNEY; Editing by Sonali Paul)
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