Glencore seeks to cut debt amid commodities shock

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Swiss mining giant Glencore, hit by collapsing commodities prices, has announced drastic moves to cut its $30 billion debt by about a third, as the slowdown in China wreaked further havoc across markets.
Glencore, which has lost more than 50 percent of its market value this year, said it planned to raise $2.5 billion (2.2 billion euros) in share sales and suspended dividend payments until further notice.
The moves were aimed at cutting about $10.2 billion in debt by the end of next year.
Glencore took the further step of suspending production at massive mines in Zambia and the Democratic Republic of Congo, as the company reels from what it has described as the worst commodities market since the financial crash of 2008-2009.
A slowdown in China, the world’s top commodities consumer, has reverberated around the globe, with major producers, including Brazil and Canada, falling into recession.
Concerns over prolonged stalled Chinese growth have slashed iron ore prices by roughly a half, as coal, copper and other commodities have fallen by 20-40 percent.
In a joint statement, Glencore’s chief executive Ivan Glasenberg and chief financial officer Steven Kalmin, sought to underscore the company’s “strong liquidity” and other solid indicators, insisting they “remain very positive on the long-term outlook” of the business.
But, they said, the need to stabilize the company’s balance sheet became necessary with stakeholders expressing concern “around the sustainability of our leverage.”
Morgan Stanley and Citigroup will underwrite 78 percent of the new shares, and senior management and board members will take the remaining 22 percent, the company said.
Glencore last week saw its largest decline on the London stock exchange since it went public in 2011, but its shares had risen Monday more than six percent in early afternoon trading to 130 pence, as analysts offered cautious praise for the moves.
“It’s a reasonably aggressive debt reduction,” Michael Bush, head of credit research at National Australia Bank Ltd., told the Bloomberg news agency by phone from Melbourne.
“Maybe they haven’t done quite enough to remove the negative outlook, but it certainly does reduce the pressure on their rating,” he added, referring to Standard & Poor’s cutting Glencore’s outlook to negative from stable recently.

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