China stainless steel mogul fights to avoid a second collapse
A debt crisis is threatening the future of one of the world’s top stainless steel producers, Jiangsu Delong Nickel Industry.
The stock issuance was part of $10 billion worth of measures proposed last week to cut its net debt by a third to around $20 billion by the end of 2016.
Mining and commodities giant Glencore (LON:GLEN) said Wednesday it has sold about $2.5 billion (£1.63 billion) of new shares, in a show of strong support from institutional investors for the fundraising that forms part of a broader debt-reduction plan.
The move is expected to help the company, the worst performer on the U.K.’s benchmark stock index this year, to pay down an almost $30 billion debt and so help protect its credit rating amid a rout in commodities prices.
Glencore said it sold the stock at 125 pence a share, a 2.4% discount to the closing price on Tuesday. Chief Executive Officer Ivan Glasenberg paid about $210 million to buy stock in the sale in order to maintain his 8.4% stake, honouring a commitment that he and other senior managers representing 22% of the company wouldn’t dilute their holdings.
The Swiss company considered alternatives to a share placing, including a convertible bond, which would have meant less dilution for existing shareholders but could have excluded some equity-only investors.
Last week the company unveiled drastic new cost cutting measures, including today’s share sale, as well as plans to sell assets, suspend dividends, and further cuts in capital spending.
The fact that the new shares were sold with only a minor discount “underlies investor confidence in the company and its outlook post the balance sheet strengthening,” BMO Capital Markets said in a note.
Glencore’s stock was up 2.15% to 130,80 pence at 2:18 pm GMT.
