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Glencore digs deep to cut debt

Monday, September 07, 2015 - 01:36

Mining and commodities trading firm Glencore has announced it will suspend dividends, sell assets and raise $2.5 billion in a new share issue. As Ciara Lee reports it aims to cut its debt by a third to $20 billion by the end of next year.

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Its first half earnings slumped 29 percent and shares have fallen 60 percent this year - but Glencore has a plan - and it's a pretty drastic one. The mining and commodities trading firm is to suspend dividends and sell assets to raise 2.5 billion dollars. The aim is to cut the company's debt by a third to 20 billion dollars by the end of next year. Shares in the company rose 8 percent on the news. Admiral Markets' Darren Sinden. (SOUNDBITE) (English) ADMIRAL MARKETS, MARKET COMMENTATOR, DARREN SINDEN, SAYING: "This is dramatic but also to be done in a realistic timescale and the market likes what it hears. Cost-cutting and debt burden reductions are always the kind of things the market likes to see. Given where we are in the interest rate cycle, this is probably a very good time to be doing that." Glencore will save $1.6 billion this year by not paying a final dividend and a further 800 million dollars by suspending one next year. The company was under pressure to cut debt after copper and coal prices sunk to more than six-year lows. A slowing Chinese economy is largely to blame. (SOUNDBITE) (English) ADMIRAL MARKETS, MARKET COMMENTATOR, DARREN SINDEN, SAYING: "It's not just China. Emerging markets generally are seeing declining demand. A stronger dollar has obviously depressed commodity prices and made a very difficult environment for the commodity producers and traders. And of course Glencore has a foot in both camps." And that has seen it suffer bigger losses than rival miners BHP Billiton and Rio Tinto. Last week ratings agencey Standard & Poor warned it might lower Glencore's credit rating, if it failed to reduce its debt.

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Glencore digs deep to cut debt

Monday, September 07, 2015 - 01:36