NEW YORK – Anglo-Swiss miner Glencore sold its first US dollar bond in two years on Tuesday, but the deal tumbled after pricing as a global sell-off added to a backlash against the deal's tight spread.

The $1-billion ten-year trade is the company's first since April 2015, and follows a recovery in commodity prices since the global decline that began that year.

But while Glencore raised relatively cheap money, investors were unimpressed, with some dropping out of the transaction when the spread was tightened and others dumping the bonds after pricing.

The bonds widened 4bp in the grey market after launching at Treasuries plus 170bp - 10bp inside initial price thoughts - and were 9bp wider on Wednesday morning.

Glencore had offered a new-issue concession of about 8bp on the trade, but the book was less than twice covered, with final demand of $1.75-billion.

The issuer was caught out by growing investor discontent over dwindling new-issue premiums, as well as a broader sell-off triggered by concerns around President Donald Trump's reforms.

"It was a trade where investors didn't feel we left much on the table for them," said a syndicate banker involved in the deal.

"Some investors took the view that the level we started with was pretty close to fair value with a minimal NIC. Some wanted a higher NIC, so they stayed away. But it got done comfortably."

The deal priced around 12bp wider than where Glencore's 4% 2025 bonds were trading before the new issue was announced.

Another banker on the deal said lots of investors drew "a line in the sand", dropping out of the book after price guidance was pulled in 10bp from initial price thoughts they already judged tight.

"It was something you knew was bound to happen at some point," he said. "Investors still have cash, but they've bought a lot of bonds over the last couple of months."

"They are not going to jump through hoops to buy bonds anymore. If you tighten pricing too much, you're going to be out of a deal."

Bank of America Merrill Lynch, JP Morgan, Mizuho, Santander and Standard Chartered were bookrunners on the deal.

Fellow miner Anglo American was meant to come to market later in the week in euros and US dollars, but the poor performance of Glencore's deal spoiled those plans.

Anglo is monitoring the market for an entry point but is in no rush, said bankers on the deal, which will be the company's first since it was stripped of its high-grade status last year.

GLENCORE RECOVERY
Glencore's bond spreads and credit default swaps have rallied sharply over the past few months, in part because of the company's commitment to reducing debt.

Its €1-billion seven-year bond issued last September - its first in euros since the sell-off - was six times oversubscribed.

Glencore said towards the end of last year it was on target to lower its net debt to between $16.5-billion to $17.5-billion by the end of 2016. In the previous 18 months, it had already slashed net debt by $12.5-billion.

The company announced a buyback in December, targeting several bonds that were part of a similar offering in October, and has prioritised maintaining a strong Triple B rating.

Moody's upgraded Glencore's rating by one notch to Baa2 on Friday, putting it two notches above junk status.

"Glencore has reduced debt, strengthened its leverage profile and re-set its financial framework in 2016," the agency said.

S&P also rates Glencore two notches above junk, at BBB.

The issuer was downgraded in late 2015 and early 2016 on the heels of the commodity rout.

ANGLO RETURN
Anglo, meanwhile, is rated Ba1/BB+, just below investment grade.

It has also been de-leveraging its balance sheet. In February 2016, it bought back around €1.6-billion-equivalent of short-dated euro, sterling and US dollar bonds, which cut its debt pile by $190-million.

The borrower has mandated Citigroup and Morgan Stanley as joint global coordinators to arrange investor calls.

Citigroup, Credit Suisse, Goldman Sachs, Morgan Stanley and UBS were hired for the potential US dollar transaction, and Barclays, BBVA, Citigroup, Morgan Stanley and Santander for the potential euro-denominated part.

But while prospects are now looking rosier for the mining industry, some market participants suggested investors were wary of how much the sector's spreads had tightened.

"A lot of investors think the spread tightening has happened already," said the second banker on Glencore's deal.

"They want to buy them cheaper."