BHP Group Ltd [ASX:BHP] revealed its plan to reduce some of their debt balance and interest payments.
BHP is a natural resources company producing minerals like iron ore as well as oil and gas exploration.
What’s the plan?
The company said they’ll be starting a subordinate note repurchase plan. A subordinate note is basically debt that ranks lower than other debts.
The plan, which is already approved by the board, targets US dollar and euro bonds that were issued in 2015. The company said they’ll be repurchasing up to a max of US$1.9 billion (this excludes accrued interest).
The scheme will last until 30 September 2020 and BHP will be funding the scheme from surplus cash.
As per their latest FY20 results, which they announced in mid-August, BHP has US$8.1 billion in free cash flow and US$12 billion in net debt. Their yearly results also showed revenue was down 3% from last year and profit was US$7.95 billion, a 4% decrease too.
The company is looking ahead at an uncertain future and expects that all major economies will shrink in 2020, and this includes China.
The company expects a lot of uncertainty in the long term with electrification of transport and decarbonisation of power. They are also looking to divest their thermal coal mines.
As they mentioned on theFY20 report, ‘coal power is expected to progressively lose competitiveness to unsubsidised renewables on a new build basis in the developed world and in China.’
At time of writing, the BHP share price was trading at $37.85. That’s 1.69% lower than yesterday and close to 5% lower from the beginning of the year.
BHP is also trading ex-dividend. That is, anyone who buys shares today won’t be receiving the declared dividend.
During their FY20 results, the company announced a dividend of (US) 55 cents a share which will be paid to shareholders on 22 September. The total dividend for the year is US$1.20 per share, 10% lower than last year.
If you are interested in dividend plays check out editor Greg Canavan’s free report ‘Five Dividend Stocks set to Thrive in the Post-Pandemic Era’.
You can access it here.