Glencore taps investors for $2.5bn

The commodities and mining giant Glencore has kicked off its promised $2.5bn (£1.6bn) fundraising, the first salvo in a $10bn emergency debt-reduction plan designed to maintain the firm’s investment grade rating.

The share sale was done through a so-called “accelerated bookbuild process”, held after the market closed. It came on a day that saw Glencore’s shares at one point fall nearly 8 per cent, plumbing new intra-day lows of 118.1p, before ending at 128.05p.

The company, a member of the FTSE 100, is placing 1.3 billion new shares with institutional investors and senior management worth up to 9.99 per cent of the company.

Some 78 per cent of the new equity is being sold to external investors, with 22 per cent going to management, including its bullish chief executive Ivan Glasenberg, who led a mega-merger of the commodity trader with mining giant Xstrata in 2013. He has watched the shares plummet from a float price of 530p in 2011.

The group’s chief financial officer and several senior board members will also take part. At the closing price, the placing would raise nearly $2.6bn, although stock was expected to be offered at a discount.

However, commentators noted that with the shares at the day’s low of 118p, the fundraising would not have reached the $2.5bn target pledged last week, and a sale of shares worth more than 10 per cent of the company could have needed a rights issue.

That would involve the cost and delay of issuing a prospectus and holding an extraordinary shareholder meeting.

The new shares will start trading on 21 September. It is unclear if the top shareholder, Qatar Holdings, subscribed for shares.

The placing forms part of a series of measures unveiled by Glencore to cut its $29.5bn debt pile by one-third after its highly-prized triple B debt rating came under threat from the rating agency Standard and Poor’s.

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.

Morgan Stanley and Citi underwrote the deal. Barclays also helped sell the shares.