Shares rally on debt-reduction plan
SHARES of Glencore, the worst performer on the UK’s benchmark index this year, headed for their biggest weekly gain in more than three years after the producer and commodity trader announced a $10 billion (R135bn) debt-reduction plan.
The stock advanced as much as 3.5 percent in London on Friday, extending the increase last week to 10 percent. The stock closed 0.68 percent higher at £1.338.
The rally also comes as copper heads for its biggest weekly advance in four months. The move is largely a response to Glencore’s decision to trim production from two of its flagship operations in Africa, taking 400 000 tons of the metal out of the market over the next 18 months.
Glencore also plans to scrap its dividend and sell assets and is working on a share sale of as much as $2.5bn. – Bloomberg raising we do, the senior partners will be participating. We think that is the way to go,” Glasenberg said.
Glasenberg is known for running Glencore with an iron fist and pushing through decisions, like he has done with most other crucial moves, such as the $29bn acquisition of Xstrata in 2012.
There is a rationale for a concerted show of confidence in Glencore’s stock, which has fallen to record lows this month – down more than half this year – on fears of a major economic slowdown in China that would hit commodities. It is designed to show that most veteran managers believe the company is seriously undervalued and stock prices will bounce back once commodities market stabilises.
One could also argue the directors became hostages of the market downturn and that the stock has fallen so sharply that there is no point in selling out.
At Thursday’s share price of £1.36 (R28.36), Glasenberg with 1.1 billion shares remains the only senior manager whose stake’s paper value tops $1bn. – Reuters