The embattled commodity trader Glencore launched its $2.5bn (£1.6bn) fundraising effort on Tuesday night, in a move aimed at shoring up its strained finances as swiftly as possible.
The share placing, part of a $10.2bn programme of fundraising and cuts announced last week, came in a week when Glencore’s struggling shares hit new lows. It will see the company’s billionaire chief executive, Ivan Glasenberg, putting up as much as $210m of his own cash.
The sale of new shares was forced on the company by investors worried that the group’s debts are too high in a world of slumping commodity prices, as previously booming demand from China has slowed.
Glencore said its bankers would attempt to place just over 1.3bn new shares to new and existing shareholders in an accelerated sales process that is expected to close no later than 7pm BST on Wednesday. The new shares represent just under 10% of the company.
Last week Glencore succumbed to shareholder pressure by announcing it would raise up to $2.5bn by selling new shares – only weeks after the company’s management insisted they were comfortable with the group’s financial position. Glasenberg and his senior management immediately committed to buying 22% of them, worth around $550m.
However, City investors will be anxious for news on how successful Glencore’s bankers have been in selling the remaining 78%. If they succeed in selling all the new stock – and raising $2.5bn – the fundraising will have secured the cash at only a small discount to the closing share price on Tuesday evening of 3%. However, raising $2bn from selling the same amount of new equity would equate to a discount of about 22%.
The trading group did not comment further on the announcement, or give any detail on which existing shareholders would be purchasing new shares. However, aides insisted privately that a share placement was always the company’s preferred method of raising the funds – rather than a rights issue, which would have involved all existing shareholders being given the chance to invest. The second option would have taken too long, one aide said, before adding that major investors had been supportive of Glencore’s plan.
The company’s shares have more than halved this year and closed on Tuesday evening at 128.05p each. The company floated in 2011 at 530p a share, but they have never reached that level since.
Glasenberg and his four closest lieutenants, who all became paper billionaires in the group’s 2011 flotation – Daniel Maté, Telis Mistakidis, Tor Peterson and Alex Beard – own around 20% of the company. To maintain that stake, the five men now have to find around half a billion dollars in cash.
However, by the time he is paid his latest dividend cheque later this month, the total dividends received by Glasenberg since the company floated will have exceeded $780m.
The group, which trades and produces a range of commodities including copper, iron ore, oil, wheat and sugar, also announced last week that it will be selling some assets and has suspended production at copper mines in Zambia and the Democratic Republic of Congo.
It has also axed the full-year dividend payout to shareholders, and next year’s interim dividend. The series of measures will find the company an extra $10.2bn, which will be used to cut debts “to the low 20 billions of dollars by the end of 2016”.
