Shares in mining and trading firm Glencore plc (00805.HK) fell almost 30 percent and closed at a record low Monday over concerns it is not doing enough to cut its debt to withstand a prolonged fall in global metals prices.
About 3.5 billion pounds (US$5.33 billion) in market value was wiped off the Swiss-based firm, whose US$10 billion share offering in 2011 turned its managers into billionaire shareholders but left it saddled with debt — a growing problem as commodity prices fell.
Chief executive Ivan Glasenberg had to bow to shareholder pressure this month by agreeing to cut debt as worries mounted over the firm’s ability to protect its credit rating.
Glencore has said it will suspend dividends, sell assets and raise cash, among other measures, to cut its US$30 billion debt pile and protect its rating after the prices of its main products, copper and coal, fell.
The fall followed publication of a note by analysts at investment bank Investec which raised doubts about Glencore’s valuation if spot metal prices do not improve. The note pointed to high debt levels and a need for deeper restructuring.
Glencore has already raised US$2.5 billion through a share placement, part of a wider plan to cut its net debt.
Glencore directors and employees took up 22 percent of the new shares as the company’s executives try to shore up market confidence in the business and retain their stake levels by percentage.
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