Glencore to sell assets, shares to trim $30bn debt

Glencore Prodeco mining operation in Columbia (Photo: Supplied)
Glencore Prodeco mining operation in Columbia (Photo: Supplied)

Johannesburg – Glencore [JSE:GLN], the commodity producer and trader, plans to sell assets and shares to cut its $30bn net debt by about a third following the rout in global markets.

The company, which last week posted its biggest weekly decline in London since going public in 2011, plans to sell about $2.5bn in new shares and assets worth as much as $2bn. It also will suspend dividend payments until further notice as it aims to reduce its net debt by about $10.2bn, the company said on Monday in a statement.

Glencore has lost more than half its market value this year, and along with BHP Billiton [JSE:BIL] and Rio Tinto Group has seen profits slump as commodity prices plunged to touch a 16-year low last month.

Rating agency Standard & Poor’s cut Glencore’s outlook to negative from stable last week, saying weaker growth in China will weigh on copper and aluminium prices.

The proposals are "designed to sensibly accelerate the deleveraging of our balance sheet, maximise future cash flow generation in the current weak commodity price environment and substantially improve our financial and credit metrics," chief executive officer Ivan Glasenberg and chief financial officer Steve Kalmin said in the statement.

Morgan Stanley and Citigroup will underwrite 78% of the proposed share sale.

Glasenberg and Kalmin and several board members will take up the remaining 22%. The company said it will save $1.6bn from suspending its 2015 final dividend and a further $800m from suspending its 2016 interim dividend.

Glencore’s net debt was $29.6bn as of June 30, according to an August 19 filing. It’s rated at BBB, the second- lowest investment grade, by S&P.

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