3rd UPDATE: BHP Billiton Offers $5.25 Billion US Bond Deal -Source

BHP Billiton Finance (USA) Ltd., financing arm of the world's biggest mining company, launched a $5.25 billion, five-part bond deal in the U.S. credit markets Tuesday, according to a person familiar with the matter.

The company, based in Melbourne, Australia, said it would use the proceeds to pay down existing debt, which would make it easier for BHP Billiton to participate in a fundamental reordering of the global mining industry now under way.

Fellow mining giants Xstrata PLC (XTA.LN) and Glencore International AG (GLEN.LN, GLCNF, 0805.HK) have proposed an industry-redefining merger that would create the fourth-largest miner after BHP, Rio Tinto Group (RIO.LN, RIO) and Vale SA (VALE5.BR, VALE). BHP recently has tried and failed to execute a pair of big takeovers, of Rio Tinto and Potash Corp. of Saskatchewan Inc. (POT.T, POT).

With interest rates on corporate bonds near record lows, companies like BHP have the opportunity to bolster their balance sheets in anticipation of new takeover offers. And investors are only too willing to accommodate them.

An investor familiar with the offering said the deal has garnered around $11 billion of orders, with demand skewed toward the longer maturities, where supply of BHP Billiton is limited.

"The deal is a testament to demand in the market," said the investor, who noted the concession, or extra yield offered to investors in the primary market, is very small.

The sale includes two-year, floating-rate notes offering 27 basis points over the three-month London interbank offered rate, and fixed-rate maturities due in three, five, 10 and 30 years, which offer respective spreads of 62, 77, 92, and 102 basis points over Treasurys. The yield on each tranche is on the narrow end of earlier guidance.

The five-year tranche is for $1.25 billion; all others are $1 billion.

BHP Billiton Finance last accessed the U.S. markets in mid-November when it borrowed $3 billion in a three-, five-, and 10-year offering. The 10-year notes improved eight basis points last Friday, relative to Treasurys, closing the week at a spread of 0.78 percentage point, according to MarketAxess.

The 77-basis-point spread on Tuesday's issue implies investors are willing to receive slightly less yield than what is offered in the secondary market, where it can be difficult to trade in large quantities.

"Investors view the primary market as a way to get exposure and they are less concerned with pricing," the investor said.

Prior to November, the company hadn't accessed the U.S. markets since March 2009, according to data provider Dealogic.

The Securities and Exchange Commission-registered deal is expected to be rated A1 by Moody's Investors Service, and A-plus by Standard & Poor's Ratings Services and Fitch Ratings. Payments are guaranteed by BHP Billiton PLC (BBL, BLT.LN), an English public limited company, and BHP Billiton Ltd. (BHP, BHP.AU), an Australian limited company.

Net proceeds are for general corporate purposes, including paying down debt and commercial paper.

Barclays Capital and J.P. Morgan are lead underwriters on the deal.

-By Patrick McGee, Dow Jones Newswires; 212-416-2382; patrick.mcgee@dowjones.com

-Dana Cimilluca contributed to this article.

Glencore Xstrata (PK) (USOTC:GLCNF)
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