Glencore Gives New Details on Debt-Reduction Plan --Update
September 15 2015 - 2:24PM
Dow Jones News
By Alex MacDonald
LONDON--Commodities titan Glencore PLC on Tuesday gave new
details about its debt-reduction plan, saying it will issue new
shares representing up to 9.99% of its existing share capital to
institutional investors.
The Switzerland-based miner and trader said it would issue 1.31
billion new shares, which at Tuesday's closing price of GBP1.28,
would add up to about $2.57 billion in new capital. The company is
likely to offer the shares at a discount, though, and had said it
would raise only up to $2.5 billion.
The announcement came just past the close of trading on the
London Stock Exchange, after a wild day for Glencore. The company's
stock plunged 8% in early trading to a new all-time low of GBP1.18,
before rallying late in the day. Glencore has been the worst
performer in the U.K.'s blue chip FTSE 100 index this year and has
been under pressure to cut debt and improve profits as prices
collapse for a range of commodities it produces and sells.
The stock issuance was part of a series of moves Glencore said
last week it would undertake to shed up to $10 billion in debt. The
company also scrapped its dividend, pledged to cut spending,
promised to sell assets and temporarily shut down two loss-making
mines in Africa.
Investors were watching for how Glencore would issue the new
shares, as company officials had been vague about when it would
occur and what form it would take.
On Tuesday, Glencore said 78% of the new placements would be
underwritten by Citigroup Inc and Morgan Stanley while the
remaining 22% of the shares will be acquired by the company's
senior management including Chief Executive Ivan Glasenberg, Chief
Financial Officer Steven Kalmin and several board members.
The company will disclose the price of the new stock once Citi
and Morgan Stanley complete the process of allotting the shares.
Barclays PLC is also involved in the process. The new shares will
be allowed to trade on Sept. 21.
Shares would be offered to both new and existing institutional
investors. Had Glencore issued new stock representing 10% or more
of its shares, the move would have been more cumbersome, requiring
that all new stock be offered to existing shareholders on an equal
(or pre-emptive right) basis.
The company's share price fall early in the day may have forced
its hand in issuing new stock. If the company had issued the stock
when it was trading lower, it may have needed to issue more than
10% of its share capital to reach the $2.5 billion equity
raise.
The measures are among the most drastic taken by any mining
company in a sector that has been racked by falling prices for
everything from iron ore to oil to copper as demand in China wanes
and supplies build up.
Glencore, a trading company founded by controversial financier
Marc Rich and built into a mining powerhouse by Mr. Glasenberg, has
been the worst hit. Its shares have fallen nearly 60% since the
beginning of the year and more than three quarters since its London
share listing in 2011. Competitors like Rio Tinto PLC and BHP
Billiton Ltd. have also suffered but not as bad, losing 20% and
15%, respectively this year.
For Glencore, the reason for the poor performance is the
continued collapse in a basket of commodities prices including
copper and coal, two of its most important earnings drivers.
Glencore is the world's largest thermal coal exporter and
largest copper supplier. Since Glencore bought mining giant Xstrata
in 2013, prices for those two commodities, and several others, have
fallen to multiyear lows.
Copper dropped to a more than six-year low last month.
The benchmark thermal coal prices in South Africa and the
Netherlands were hovering at $51.95 a metric ton and $50.90 a ton
respectively on Tuesday, a multiyear low since the onset of the
financial crisis in 2008. A third benchmark thermal coal price in
Australia was hovering at $57.65 a ton, down 6.9% this year.
Josie Cox contributed to this article
Write to Alex MacDonald at alex.macdonald@wsj.com.
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
September 15, 2015 14:09 ET (18:09 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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