Glencore raises $2.5 bn through share placing to cut debt

Glencore has raised $2.5bn through a share placing, part of the miner-cum-trader’s $10bn package of measures to cut its large debt load and safeguard its investment grade credit rating.

The UK-listed group, reeling from the latest commodities slump, issued 1.3bn new shares on Wednesday at a price of 125p, a slight discount to Tuesday’sclosing price of 128p. The stock had touched a record low of 118p earlier on Tuesday.

Shares in Glencore rose 3.2 per cent to 132p on Wednesday morning.

The new shares issued represent 9.99 per cent of the company’s issued ordinary share capital prior to the placing.

Senior executives bought a large portion of the new shares, including Ivan Glasenberg , chief executive, who spent $211m. Telis Mistakidis, Glencore’s head of copper, spent $80m while Daniel Mate, head of zinc, spent $81m.

The equity issue is the first cash call by one of the world’s large diversified mining groups since the so-called commodities supercycle went into reverse, prompted by China’s economic slowdown.

Glencore has been among the hardest hit because of concern for its $30bn of net debt and exposure to commodities such as copper and coal, which are trading close to their lowest levels since the financial crisis.

Glencore’s shares have slumped by more than half this year, making them the worst performer in London’s FTSE 100 index. They have lost more than three-quarters of their value since the company’s 2011 initial public offering — the largest ever on the London Stock Exchange.

Tuesday’s equity placing, equivalent to just under 10 per cent of Glencore’s existing share capital, comes a week after Mr Glasenberg promised to prepare the group’s balance sheet for “Armageddon”.

The debt reduction package also includes a plan to sell up to $2bn of assets and scrap two dividend payments amounting to $2.4bn.

Preserving Glencore’s investment grade credit rating is important for its trading business, which needs access to cheap finance in order to move millions of tonnes of copper, coal and other commodities around the world.

Analysts believe more miners might be forced to follow Glencore’s decision to raise funds and cut dividends.

The decision to issue shares via a so-called accelerated bookbuild means Glencore can proceed quickly, without the need for a shareholder vote or the publication of a prospectus.

People close to Glencore said the intention was to give shareholders first refusal on whether to buy shares, in proportion to their existing holdings, but potentially excluding hedge funds that have shorted the stock.