Gulf in cost of borrowing reflects diverging fortunes of BHP and Fortescue
A gulf of difference in the cost of financing for Fortescue (ASX:FMG) and BHP Billiton (ASX:BHP) draws into relief the diverging outlook for the two iron ore stalwarts.
Business Day reports Fortescue has just revealed that its $5 billion credit facility will attract a minimum interest rate of 5.25%, 125 basis points higher than BHP's rate of 4% for the $1 billion in Aussie bonds it issued last week.
The slump in commodities spot prices induced by ailing demand from China has battered major Australian miners, yet Fortescue has been especially hard hit as a pure iron ore player with an onerous debt burden.
Fortescue is currently saddled with a junk credit rating of BB- on negative watch from Standard's and Poor's. BHP has conversely received a rating of A+ stable from the same agency.
The Aussie iron ore miner managed to forestall its debt woes in September by obtaining a USD$4.5 billion credit facility from a consortium of the world's leading investment banks.