Glencore shares soared 11 per cent to 136 pence after it said it will suspend dividends, sell assets and raise $2.5 billion (Dh9.18 billion) in a new share issue as it aims to cut its debt to $20 billion by the end of next year.
According to the company press release, 78% of the proposed equity issuance is underwritten by Citi and Morgan Stanley, and the remaining 22% has been committed by the company’s senior management.
Net debt was $29.6 billion as of June 30, according to an August. 19 filing.
Ratings agency Standard & Poor’s said last week it might lower Glencore’s credit rating if the giant did not reduce its debt.
Glencore shares rose 11.8 per cent on Britain’s top share index after the decision was announced, and the firm was set for its biggest one-day gain ever, having hit an all-time low in the previous session. “It may be too much, ” he said, saying if commodities prices recover, the company could restore its dividend, for instance.
Copper gained after commodities group Glencore announced plans to shut down loss-making mines to help to reduce a glut of supply that has weighed on prices.
People’s Bank of China Governor Zhou Xiaochuan over the weekend told central bankers and finance ministers (http://www.marketwatch.com/story/chinas-central-bank-chief-predicts-end-of-market-rout-2015-09-07) from the Group of 20 largest economies that the “correction in the stock market is nearly done”, and that the Chinese yuan is steadying after a devaluation last month.
But in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1 percent, driven by stocks in China where markets reopened after closing over Thursday and Friday as Beijing marked 70 years since the end of World War Two.
“It’s clear people want us to get the balance sheet in line with potentially lower commodity prices”, Chief Executive Officer Ivan Glasenberg said in a phone interview, commenting on meetings with investors. A suspension of operations will remove approximately 400,000 tonnes of copper cathode from the market. We reiterate our 2015 full year marketing EBIT guidance of US$2.5 billion to US$2.6 billion and remain confident of our long-term guidance range of US$2.7 billion to US$3.7 billion.
But there were calls for Glencore to reveal more of the workings of its powerful trading arm.
Michael Redmond, chairman of the veterinary pharmaceutical specialist, said: “Current trading is in line with management expectations; however, the business continues to be exposed to exchange rate volatility”.
“As such, we can’t distinguish what portion of the profits of the division are correlated with prices or the activities that should be less correlated with commodity prices”, he added.