Glencore raises $2.5bn in new rights issue, despite record low share price

By Jesse Riseborough

(Bloomberg) — Glencore Plc, the worst performer on the U.K.’s benchmark stock index this year, is selling as many as 1.3 billion new shares to pay down debt and avert a credit- rating cut. The stock would be valued at $2.57 billion at Tuesday’s closing price.

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The offering, taking place on the same day the shares hit a record low, represents 9.99 percent of Glencore’s existing equity, the Swiss commodities trader and miner said in a statement Tuesday. The deal probably will price within a 5 percent discount to the 128.05 pence close, said a person familiar with the transaction, who asked not to be identified before results are made public. There is demand for all shares in the book build, although orders below 125 pence risk missing out, according to terms obtained by Bloomberg.

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The transaction is part of a debt-cutting program Glencore announced last week that includes plans to sell as much as $2.5 billion worth of new stock, cut spending and halt dividends in a bid to reduce $30 billion of debt by a third. Glencore’s billionaire Chief Executive Officer Ivan Glasenberg responded to some investors’ worries that a debt-laden balance sheet can’t withstand the rout in commodity prices.

“Investor concern will shift from the debt-reduction measures to the longer-term sustainability of Glencore’s business in the current commodity price environment,” Goldman Sachs Group Inc. analyst Eugene King wrote in a note to clients. “Today’s announcement should be beneficial for the stock.”

Read also: As Glencore leads, Anglo will follow – cut dividend, rights issue on cards

Morgan Stanley and Citigroup Inc. will underwrite 78 percent of the proposed share sale. Barclays Plc is also a book- runner on the sale.

Glasenberg and several senior managers and board members including Telis Mistakidis, Daniel Mate, Alex Beard, Tor Peterson and Chief Financial Officer Steve Kalmin have committed to take the remaining 22 percent.

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