Glencore announces $10bn debt trimming measures as trader battles commodity prices

Glencore is selling $2.5bn (£1.5bn) worth of shares to investors to trim its heavy debt, the company announced on Monday (7 September).

The commodity trader announced it is introducing additional measures which add up to $7.7bn , sending its share price soared by more than 10% after the news broke and leading the FTSE 100 as the biggest riser. The company is raising capital to reduce its debt of almost $30bn after it reported a loss of $676m in the first half of its 2015 financial year.

Glencore's CEO, Ivan Glasenberg, said: "Notwithstanding our strong liquidity, positive operational free cash flow generation, lack of debt covenants, modest near-term maturities and the recent affirmation of our credit ratings, recent stakeholder engagement in response to market speculation around the sustainability of our leverage, highlights the desire to strengthen and protect our balance sheet amid the current market uncertainty.

He said that the sale of shares would not hurt business and reassured investors that they are designed to maximise cash flow generation and would help the company survive in the current commodity price environment, where it depends on stability and strength.

The trader said it expects to save $1.6bn on the suspension of full year dividends in its 2015 financial year, which it announced when sales were dropping earlier in the year.

Glencore's share price has more than halved since September 2011 and the falling commodity prices are not helping its business. The price of copper fell to $227.85 per pound, its lowest since 2009. Analysts have said they expect falling Chinese demand on the back of financial turmoil in Asia to further weigh down the price of the industrial metal.

Augustin Eden, analyst at Accendo Markets, called Glencore a bargain blue-chip for short-term traders, saying: "While the fact remains that commodities are still under immense pressure and those who dig them up are too, blue-chip stocks trading at a discount like Glencore's provide an ideal vehicle for riding price swings of 10% or more."