Glencore raises $2.5 billion in share sale to rein in debt

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MINING and trading group Glencore has raised $2.5 billion through a share placement as investors including senior managers upped their bets on the company to help it cut debt and protect its credit rating.

The London-listed company has been under pressure to reduce its net debt of almost $30 billion - built up through years of rapid expansion - after a slump in prices of its main products, copper and coal.

It announced plans last week to sell assets and new shares and suspend dividends, as well as further cuts in capital spending.

Glencore said on Wednesday it had placed around 1.31 billion new shares, representing 9.99 per cent of its share capital, with existing and new shareholders. The sale was priced at 125 pence a share, representing a 2.4 per cent discount to the stock’s closing price of 128.05 pence on Tuesday.

“Raising $2.5 billion at such a minor discount to the share price underlies investor confidence in the company and its outlook post the balance-sheet strengthening,” BMO Capital Markets analysts said in a note.

Glencore directors and employees took up 22 per cent of the new shares as the company’s executives try to shore up market confidence in the business and retain their stake levels, by percentage.

Chief executive Ivan Glasenberg bought 110 million shares, raising his stake to 1.2 billion shares and maintaining it at 8.42 per cent.

Swiss-based Glencore aims to cut its debt by a third by the end of next year. Its strategy, which includes shutting down some copper mines in Zambia and Democratic Republic of Congo to support flagging prices, had triggered a rally in its share price last week, but concerns of further falls in commodity prices continue to weigh.