Glencore to stop dividends and sell assets to cut debt

Mining and commodities trading firm Glencore yesterday said it would suspend dividends, sell assets, and raise $2.5bn (€2.24bn) in a new share issue to cut its debt by a third to $20bn by the end of next year.

Formerly a commodities trader, Glencore merged with miner Xstrata in 2013.

It was thought the trading business would cushion the combined company against swings in commodity prices, but last month it reported first-half earnings had slumped 29%.

The company has been under pressure to cut debt, it was $29.6bn net at the end of June, as prices for its key products, copper and coal, sank to six-year lows.

Glencore said 78% of the proposed share issue was underwritten by Citi and Morgan Stanley, while its senior management will take up the remaining 22%.

It will not pay a final dividend for 2015, which will save $1.6bn, while $800m will be saved suspending the 2016 interim dividend.

The company expects to raise $2bn from the sale of assets, and $500m-$1bn will be saved from further cuts in capital spending to the end of 2016.

It also expects to have reduced working capital by an additional $1.5bn by the end of next June.

Ratings agency Standard & Poor’s said last week it may cut Glencore’s ‘BBB/A-2’ credit ratings if its operational funding to debt ratio failed to recover to more than 23%, from 20%.