7th Sep 2015 06:28
LONDON (Alliance News) - Glencore PLC on Monday outlined plans to improve its financial position, including a USD2.5 billion capital raising plan and multiple capital preservation and debt reduction measures it will take, worth up to a combined USD10.2 billion in cost savings.
The multi-commodities miner and trading company, which is the worst performing stock in the FTSE 100 this year, said the USD2.5 billion fully-committed equity issue will be used to cut its debt pile and to increase its financial strength. It is 78% underwritten by Citigroup and Morgan Stanley an includes commitments from the group's chief executive, chief financial officer and several other board members, who will cover the remaining 22% of the issue.
Glencore said it will provide more details on the issue in due course.
The group added it will take another USD7.7 billion worth of actions between now and the end of 2016 in order to cut costs across the business. Glencore said it will suspend its 2015 final dividend, saving it USD1.6 billion and will save another USD800.0 million by suspending its interim dividend for 2016.
It will also generate around USD1.5 billion in savings from a reduction in its working capital and raise around USD2.0 billion from the sale of assets. In addition, it will look to save USD500.0 million to USD800.0 million from a reduction in long-term loans and advances it has made, plus another USD500.0 million to USD1.0 billion from cuts to industrial capital expenditure plans through to the end of 2016.
Glencore also noted an announcement made by two of its subsidiaries in Africa. Katanga Mining Ltd in the Democratic Republic of Congo said that it has started a review of its business amid the challenging commodities market environment, with a similar review having started at Mopani Copper Mines in Zambia.
"Notwithstanding our strong liquidity, positive operational free cashflow 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," said Glencore Chief Executive Ivan Glasenberg.
"The measures we have announced today do not affect our core business activities and overall franchise value and have been designed to sensibly accelerate the deleveraging of our balance sheet, maximise future cash flow generation in the current weak commodity price environment and substantially improve our financial and credit metrics, stability and strength, in the event of a prolonged weaker pricing environment," Glasenberg added.
By Sam Unsted; [email protected]; @SamUAtAlliance
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