Glencore to sell assets, shares to trim $43 billion debt

Commodity trader Glencore plans to see assets and shares to cut its US$30 million (S$42.7 million) debt.
Commodity trader Glencore plans to see assets and shares to cut its US$30 million (S$42.7 million) debt. PHOTO: BLOOMBERG

MELBOURNE (BLOOMBERG) - Glencore Plc, the commodity producer and trader, plans to sell assets and shares to cut its US$30 billion (S$42.7 billion) net debt by about a third following the rout in global markets.

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

Glencore has lost more than half its market value this year, and along with BHP Billiton Ltd. and Rio Tinto Group has seen profits slump as commodity prices plunged to touch a 16- year low last month. Standard & Poor's cut Glencore's outlook to negative from stable last week, saying weaker growth in China will weigh on copper and aluminum prices.

The proposals are "designed to sensibly accelerate the deleveraging of our balance sheet, maximize 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 Inc. will underwrite 78 per cent of the proposed share sale. Glasenberg and Kalmin and several board members will take up the remaining 22 per cent. The company said it will save US$1.6 billion from suspending its 2015 final dividend and a further US$800 million from suspending its 2016 interim dividend.

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