Glencore raises $2.5 billion in share placement

The FTSE-100 listed multi-commodity miner and trader had late Tuesday announced its intention to raise USD2.50 billion, or USD1.60 billion through the placing of 1.31 billion shares.

The price represents a 2.4 percent discount to Tuesday’s close.

“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.

The stock issuance was part of a series of moves Glencore said last week it would undertake to shed up to $US10bn in debt. Chief Executive Officer Ivan Glasenberg bought shares in the sale to maintain his 8.4 percent stake, honoring a commitment that he and other senior members of management wouldn’t dilute their holdings. The company has also been hit by growing uncertainty about the timing and structure of the proposed equity issue of up to $2.5 billion as it seeks to pay down debt and stave off a potential credit-rating downgrade. Barclays is also involved in the process. It is unclear if the top shareholder, Qatar Holdings, subscribed for shares. The company’s stock has fallen 63pc since a year ago and is trading far below its listing price in 2011 of 530p per share. 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.

Copper dropped to a more than six-year low last month. He has watched the shares plummet from a float price of 530p in 2011. There is an oversupply of materials like iron ore and copper, and demand from China appears to be slowing as the giant consuming nation experiences new economic difficulties.