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Wells Fargo Overtakes JPMorgan as Financing Expands: Commodities

July 18, 2013

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July 18 (Bloomberg) -- Wells Fargo & Co. overtook JPMorgan Chase & Co. as the biggest lender to commodities companies in the second quarter, as total financing rose to the highest level since 2011 after a record loan to Glencore Xstrata Plc.

Wells Fargo’s biggest deals were a $2.5 billion revolver facility to Oasis Petroleum North America LLC and a $4 billion revolving credit for Linn Energy LLC, data compiled by Bloomberg show. The San Francisco-based bank bought $9.5 billion of BNP Paribas SA’s energy loans in 2012. The total provided to the industry rose 13 percent to $188.6 billion from a year earlier as Glencore Xstrata raised $17.3 billion.

The money provided would have risen 2.3 percent without that deal, lagging behind the 8.8 percent gain across all industries as record-low interest rates spurred companies to refinance debt. Commodities tumbled to a nine-month low in April as Chinese growth slowed and supply surpluses emerged.

"It’s a refinancing market," said Craig Gardner, a managing director at RBC Capital Markets in Toronto. "The mining borrowers that went to market timed it perfectly, partially by luck, given what happened to commodity prices. There was an increased nervousness in the market amongst the borrowers and they just wanted to put it to bed."

 

Worst Performance

 

Gold, copper, iron ore, corn and tin were among commodities that tumbled into bear markets last quarter. The 115-member Bloomberg World Mining Index of equities slumped 30 percent this year, the worst performance since the gauge began in 2003. The MSCI All-Country World Index advanced 10 percent and a Bank of America Corp. index shows Treasuries lost 2.4 percent.

It was the first time in three quarters that JPMorgan, the biggest U.S. bank by assets, didn’t top the table. It came third behind RBC Capital Markets, part of Royal Bank of Canada, the country’s largest lender by assets.

Wells Fargo, the largest U.S. mortgage lender, made $17.5 billion of loans to commodities companies in the second quarter, from $5.5 billion in the previous three months, when it ranked seventh, the data show. It was co-lead arranger with RBC Capital Markets on the loan to Linn Energy, which agreed to buy Berry Petroleum Co. for $2.42 billion in February. It didn’t participate in the Glencore Xstrata financing.

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