But with Glencore’s share price continuing to fall, some analysts say the company may need to issue more shares to raise funds. If the issue had happened when the stock was trading lower, Glencore would have been forced to issue more than 9.99 percent in order to meet its $2.5 billion target, which would have slowed and complicated the process. A rout in commodity prices has eroded profit, raising concern that credit agencies might cut their rating on Glencore’s debt.
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It announced plans last week to cut debt by a third by the end of 2016.
On Tuesday, Glencore said 78 per cent of the new placements would be underwritten by Citigroup and Morgan Stanley while the remaining 22 per cent of the shares will be acquired by the company’s senior management including chief executive Ivan Glasenberg, chief financial officer Steven Kalmin and several board members.
The company will place just over 1.3bn new shares, comprising 10pc of the exisiting capital, and investors will have until 7pm tonight to buy into the offering.
Glencore will also scrap its dividend, reduce spending, sell assets, and close two underperforming mines in Africa for a short period in a bid to save a further $7bn. Barclays also helped sell the shares.
Switzerland-based Glencore suspended trading of its shares in Hong Kong and London on Wednesday. Its shares have fallen almost 60 per cent since the beginning of the year and more than three quarters since its London share listing in 2011.
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However, despite investors welcoming the plan, traders have conceded that the current commodities market conditions, especially in copper and coal, are still significantly weaker, pushing Glencore’s stock to reverse much of the gains since last week.
