Glencore Shares Surge On Debt Reduction Proposal Worth Around $10 Bln

(RTTNews) - Glencore Plc (GLCNF.PK, GLNCY.PK, GLEN.L) shares on London rose nearly seven percent on Monday as the company announced a debt reduction package worth $10.2 billion, including cut in dividends, asset sales suspension of copper production units. The company plans to reduce net debt to a range of $20 billion by the closing of 2016.

In the morning trade, the shares spiked from a range of 123 pence to 137 pence range. On a longer prospective, the shares have been on a downward stride for the last several months.

As per the plan, the Switzerland based commodity trader and miner proposed to raise fully committed equity capital of $2.5 billion and to achieve $7.7 billion through additional capital preservation or debt reduction measures through 2016.

Ivan Glasenberg, CEO and Steven Kalmin, CFO said, "Notwithstanding our strong liquidity, positive operational free cashflow generation, lack of debt covenants, modest near-term maturities and the recent affirmation of our credit ratings, recent stakeholder engagement in response to market speculation around the sustainability of our leverage, highlights the desire to strengthen and protect our balance sheet amid the current market uncertainty.

The company noted that 78 percent of the proposed equity issuance will be undertaken by Citi and Morgan Stanley, while 22 percent will be taken up by the senior management. It will suspend 2015 final dividend to save $1.6 billion and suspend interim dividend for 2016 to save $800 million.

Reduction in working capital will contribute $1.5 billion, meanwhile sales of assets is expected to add $2 billion. Glencore plans precious metal streaming transactions and the minority participation of third party strategic investors in certain of agriculture assets and infrastructure.

Reduction in long-term loans and advances will contribute $500 to $800 million and cut in industrial capital expenditure for up to 2016 will provide $500 to $1 billion.

Optimization of portfolio, including review of Katanga and Mopani operations and the suspension of certain African production facilities, are also under consideration. Glencore expects removal of around 400 thousand tonnes of copper cathode and the tightening of market.

Further, Glencore reiterated its 2015 full year marketing EBIT guidance of $2.5 billion to $2.6 billion and its long-term guidance range of $2.7 billion to $3.7 billion.

GLEN.L is currently trading at 131.35 pence, up 6.68 percent on London Stock Exchange.