Johannesburg - Mining and commodities trading firm Glencore announced on Monday it will suspend dividends, sell assets and raise $2.5 billion in a new share issue as it aims to cut its debt by a third to $20 billion by the end of next year.
The London-listed company has been under pressure to cut debt - which stood at $29.6 billion net at the end of June, as prices for its key products, copper and coal, have sunk to more than six-year lows.
Glencore said 78 percent of the proposed share issue was underwritten by Citi and Morgan Stanley while its senior management have committed to take up the remaining 22 percent.
It also said it would not be paying a final dividend for 2015, which would save about $1.6 billion, while around $800 million would be saved from the suspension of the 2016 interim dividend.
The company added that it expects to raise about $2 billion from the sale of assets and $500 million to $1 billion will be saved from further cuts in capital spending to the end of 2016.
Glencore's share price has slumped by nearly 60 percent this year to record lows, a much worse performance than that of rival miners like BHP Billiton and Rio Tinto .
Standard & Poor's warned last week it may lower Glencore's 'BBB/A-2' credit ratings, if the company's ratio of adjusted funds from operations to debt failed to recover to more than 23 percent from 20 percent in the year to June 2015.
“We would likely lower the rating on Glencore if we perceive reduced commitment to defending the rating or if commodity prices persist below our price deck or fall further, absent material offsetting factors,” S&P said last week.
But the rating agency said Glencore's scale in the trading business and its plans to cut capital spending should help it hold onto the rating.
Moody's reaffirmed its Baa2 ratings on Glencore with a stable outlook but said the company needed to cut its gross debt further to support the rating.
REUTERS