Glencore launches $2.5 bln share placement

The sale was priced at 125 pence a share, the company said on Wednesday.

Shares of Glencore PLC slumped to a record low, erasing gains since announcing a $10-billion (U.S.) debt-reduction plan designed to reassure investors amid mounting concern about the commodity trader and miner’s borrowing load. At the closing price, the placing would raise almost $2.6bn, although stock was expected to be offered at a discount.

The placing forms part of a series of measures unveiled by Glencore to cut its $29.5bn debt pile by one-third after its highly-prized triple B debt rating came under threat from the rating agency Standard and Poor’s. Glencore directors and employees have taken up 22 percent of the new shares as the company’s executives try to shore up market confidence in the business.

The company, a member of the FTSE 100, is placing 1.3 billion new shares with institutional investors and senior management worth up to 9.99 percent of the company. Glencore will also sell assets and cut capital spending in a bid to lower the debt.

The new shares will start trading on 21 September. Had Glencore issued new stock representing 10 per cent 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 stock has fallen 63pc since past year and is trading far below its listing price in 2011 of 530p per share.

Barclays slashed its share price target for Glencore to 186p yesterday, while Jefferies lowered its own to 140p. Competitors like Rio Tinto and BHP Billiton have also suffered but not as bad, losing 20 per cent and 15 per cent, respectively this year.

The purchase catapulted Glencore into the mining big league, making it the world’s largest thermal coal exporter and largest copper supplier.