Although not primarily in the business of precious metals, Teck Cominco Ltd.s (TSX: TCK.B) US$4.4-billion bridge financing deal announced yesterday needs mentioning. The deal, which essentially pushes out its main debt obligations out a few years, has bought Teck — a diversified miner of copper, coal, zinc, and gold — breathing room.
Effectively, the companys repayment schedule has been extended by two to three years, lessening the need for a rushed and potentially value destructive asset sale or security issue, wrote Tony Robson, analyst at BMO Capital Markets, in a note to clients.
[It] takes the pressure off Teck to sell assets at fire sale prices and gives the company time to let credit markets heal, wrote Greg Barnes, analyst at TD Newcrest, in a note to clients.
Investors sent Tecks stock soaring more than 35% yesterday. Besides yesterday announcing the bridge financing, Teck also announced its Q1/09 earnings, which included a jump in revenue of 11% to $1.7 billion and a jump in operating profit before depreciation and pricing adjustments of 29% to $765 million. At the time to of this writing, Teck shares are trading at $12.23, down 1.92% from yesterdays close.
Teck has faced increasing pressure after it purchased Fording Canadian Coal Trust last year, in a deal that closed October. Most of its $10-billion debt is related to the Fording acquisition.
During the Q1/09 analyst conference call yesterday, Don Lindsay, Tecks president and CEO, said I guess the message that we are sending is that while we do have a refinancing challenge to complete, the underlying assets of the company are operating very well. Indeed, there is a new growth coming that we are particularly pleased with. He also reiterated that Teck has no plans for an equity issue.
Says one observer, Teck is still on track to be a Canadian success story in bulk commodities.