Through its official press release, Glencore has declared that 78% of the proposed equity issuance are underwritten by Citi and Morgan Stanley, while the residual 22% has been committed by the company’s senior management.
It was announced by Glencore boss Ivan Glasenberg that the company could still generate positive cash flows at current low commodity prices.
The Company’s plan to trim Glencore’s $30 billion debt by 10 percent by the end of next year wasn’t that sufficient so as to stop a thrust in the company’s market value and which has more than halved to about 17 billion pounds ($26 billion) this year. While analyzing this news, Heath Jansen, one of the well-known analysts at Citigroup, expresses his opinion in the following words on Monday. “This significantly improves the balance sheet of the company, it comfortably places Glencore in the investment grade territory by rating agencies under most commodity scenarios”.
Simultaneously, the declaration of an upcoming stoppage at Glencore’ Mopani operation in Zambia and the Katanga facility in the DRC had also an instantaneous effect on copper prices and also with the red metal climbing more than 1% to $5,192 a tonne on the London Metal Exchange.
Most importantly, the debt-reduction program that has been announced on Monday is a new track for the company and also for its chief financial officer Steve Kalmin, who openly stated in August that the company protect its credit rating and still make dividend payments. Moreover, with even the Monday’s bounce, its shares were still down to more than 50 percent this year after hitting the record lows last week.
Although, things are going in a good direction for the company, however, there’s still a way to go before the shares recover from their fresh lows and also the firm had lost 60% of its value since early May as a result of the commodities slump, prior to the recent boost. Moreover, Glencore is also expected to raise a total of $2 billion from asset sales including minority stakes in its agriculture business.
In spite of the disorder in commodity prices, Glencore had declared last month that its cash flow was well-enough “comfortable” to service the debt and in return cash to shareholders and support growth.
“With Fed lift-off coming soon and the USA recovery on track, we expect to see the 10-year yield close to 3 percent by the end of 2016”.
The authorities at Glencore are hoping that the decision will most certainly remove about 400,000 metric tons of copper cathode from the market.
According to Messrs. Glasenberg and Kalmin have signaled the moves that were announced Monday that they were conservative and pro-active, but were taken to reassure shareholders. Moreover, they also reiterate 2015 full year marketing EBIT guidance of US$2.5 billion to US$2.6 billion and also remain confident in their long-term guidance range of US$2.7 billion to US$3.7 billion.