Glencore to complete 2 deals to slash down debt

By Money Times

Oct 02, 2015 02:02 AM EDT

Suffering from weakening global commodities for the past one year, Glencore has informed its investors about its plans to reduce debt by $10billion. Towards this debt reduction target, Glencore is planning to conclude two deals by the end of this year or early of next year. The Anglo-Swiss multinational commodities major has been facing rough conditions in the market.

However, assuring investors, Glencore said it was on the right track in slashing down the debt burden in the stipulated time frame. Despite assurance from the company and well-known banker John Mack to buy 600,000 worth of stock, the share price has been plummeting in the market. The forecast of Barclays that Glencore may retain its credit rating also couldn't boost the investor confidence.

Glencore is engaged in commodities trading and mining activity. Barclays in its meeting expressed its confidence that Glencore has been able to address several concerns that have become causes of concern. As a result, Glencore's stock was easing off. 

Barclays has projected that there may not be a downgrade of the credit rating of Glencore."Our credit colleagues believe the company can retain its credit rating although the market clearly disagrees with us," said an analyst at Barclays.

Glencore's stock price fell about 70 percent this year so far. After dropping drastically on Monday, the stock was volatile throughout the week. Glencore said that John Mack, former Chief Executive of Morgan Stanley, had acquired stock. A former BP head and Tony Hayward, a Glencore board member, have also bought some stakes in Glencore from the market.  

The stock price during intraday trading on Thursday gained six percent following the statements from Barclays that Glencore has been able to manage the several concerns. Barclays had convened a meeting with Glencore's management on the ongoing adverse conditions for the commodity giant. The core point of the discussions at the meeting was on debt reduction plan and balance sheet.

While expressing confidence over Glencore that it may retain credit rating, Barclays further said the market is concerned about the Glencore's debt issue and our credit colleagues term it as a premature. Barclays' analysts don't think Glencore is at risk of default.

Glencore is in the process of selling a stake in the agricultural business in early 2016. It's about to close another deal on selling by-products. Selling by-products like silver, gold from copper production at an agreed price much before mining will enhance revenues for the company. These two deals are expected to give Glencore much breather in rthe eduction of debt.

The slump in commodity prices and heavy debts that accumulated over the asset buying spree have been taking a toll on the performance of Glencore. The Swiss-based commodities trader and miner's ability to service heavy debts has been posing a major challenge for the company and a concern among investors.

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