Glencore Suspends Dividend, Plans to Issue US$2.5 Billion in Shares and Sell Assets

Glencore Plc (LSE:GLEN) announced a new debt reduction plan on Monday aimed at adapting to the current commodity price rout. The company plans to suspend its final 2015 dividend, and will issue US$2.5 billion in shares, and sell some of its assets, aiming to reduce its debt by about $10 million.
As quoted in the press release, measures will include:

A proposed equity issuance of up to US$2.5 billion to reduce indebtedness and increase
financial strength;
o 78 per cent of the proposed equity issuance underwritten by Citi and Morgan
Stanley; and
o commitments from Glencore senior management (including CEO, CFO and
several Board members) to take up the remaining 22 per cent. of the proposed
equity issuance.
o More details of the proposed equity issuance will be provided in due course.
• Additional measures with a value of up to US$7.7 billion to be implemented between
now and the end of 2016, including:
o approximately US$1.6 billion to be saved from the suspension of the 2015 final
dividend, intended to do so in the current commodity environment;
o approximately US$800 million to be saved from the suspension of the 2016
interim dividend, intended to do so in the current commodity environment;
o approximately US$1.5 billion to be generated from further reduction in working
capital;
o approximately US$2.0 billion to be raised from the sale of assets, including, but
not limited to, proposed precious metals streaming transaction(s) and the
minority participation of 3rd party strategic investors in certain of Glencore’s
agriculture assets, including infrastructure;
o US$500 million to US$800 million to be generated from a reduction in long-term
loans and advances made by Glencore (c.US$4 billion at 30 June 2015); and
o US$500 million to $1.0 billion to be saved from an additional reduction in
industrial capital expenditure to the end of 2016.
• Ongoing focus on portfolio optimisation and reduction of operating expenditures:
o operations at Katanga and Mopani are under review and in the process of
suspending certain African production until the completion of the remaining costtransforming
projects which are on schedule to be completed by the first half of 2017. An 18 month suspension will remove approximately 400,000 tonnes of copper cathode from the market.
This review is detailed in a separate RNS which was released today.

Glencore CEO Ivan Glasenberg, and CFO Steven Kalmin, stated:

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.
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.
We remain very positive on the long-term outlook for our business and this is reinforced by
senior management’s commitment to take up 22 per cent. of the proposed equity issuance.
Copper and zinc are both supply-challenged and an essential ingredient of future global growth.
In seaborne thermal coal, a capex drought and low prices have helped rebalance the market.
We are confident that thermal coal’s position and availability as the lowest cost fuel source for
many large economies will underpin its key role in the global energy mix for many years to
come.
We have today an extensive portfolio of long-life, low-cost industrial assets, benefitting from the
unique capabilities of our marketing business. We reiterate our 2015 full year marketing EBIT
guidance of US$2.5 billion to US$2.6 billion and remain confident of our long-term guidance
range of US$2.7 billion to US$3.7 billion.

Click here for the full press release.