3.2.2 Reducing debt
Owing to the fact that, as a gold producer, we are essentially a price taker for the primary product that we produce, we have long held the position that our debt comfort zone is a net debt to EBITDA ratio of approximately 1.0 times.
During 2015 our net debt decreased by US$73 million from US$1,453 million at the end of December 2014 to US$1,380 million at the end of December 2015, which resulted in a net debt to EBITDA ratio of 1.38. This is in addition to the reduction of our net debt by US$282 million to US$1,453 million during 2014.
Net debt as a percentage of enterprise value increased to 39% at the end of December 2015, compared to 24% at the end of December 2014, amid the decline in our market value during the year.
The net debt reduction during 2014 and 2015, together with the agreement reached with our group of bankers in 2014, to amend and extend the maturity date of commitments totallingUS$745 million, by two years to November 2017, on the same terms, has significantly improved the Group’s solvency and liquidity.
At the end of 2015, Gold Fields had committed and uncommitted loan facilities totalling US$2,648 billion and R3.947 billion, of which US$0.844 billion and R3.695 billion respectively are unutilised. The facilities will mature between 2017 and 2020, unless they are refinanced before their maturity dates.
Subsequent to year-end Gold Fields made a tender offer to buy back US$200 million of our US$1 billion 2020 bond as the bonds were trading at a discount on the secondary market. Upon expiry of the tender offer on 25 February 2016 Gold Fields opted to accept US$148 million of the bonds tendered at a price of 88% of the notional value. This resulted in a reduction in net debt of approximately US$18 million. Gold Fields intends holding the bonds acquired until their maturity date.
This debt buy back was funded through a successful R2.3 billion (US$150 million) equity raising, by way of a private placement to institutional investors on 18 March 2016. The effect of these transactions will be a reduction in the net debt to EBITDA ratio from 1.38x as at 31 December 2015 to 1.21x and gets us closer to our strategic objective of reducing the ratio to 1.0x, though the timing of achieving this objective also depends on the gold price.