RIO Rio Tinto Plc

By Alex MacDonald 

LONDON--Commodities titan Glencore PLC on Tuesday gave new details about its debt-reduction plan, saying it will issue new shares representing up to 9.99% of its existing share capital to institutional investors.

The Switzerland-based miner and trader said it would issue 1.31 billion new shares, which at Tuesday's closing price of GBP1.28, would add up to about $2.57 billion in new capital. The company is likely to offer the shares at a discount, though, and had said it would raise only up to $2.5 billion.

The announcement came just past the close of trading on the London Stock Exchange, after a wild day for Glencore. The company's stock plunged 8% in early trading to a new all-time low of GBP1.18, before rallying late in the day. Glencore has been the worst performer in the U.K.'s blue chip FTSE 100 index this year and has been under pressure to cut debt and improve profits as prices collapse for a range of commodities it produces and sells.

The stock issuance was part of a series of moves Glencore said last week it would undertake to shed up to $10 billion in debt. The company also scrapped its dividend, pledged to cut spending, promised to sell assets and temporarily shut down two loss-making mines in Africa.

Investors were watching for how Glencore would issue the new shares, as company officials had been vague about when it would occur and what form it would take.

On Tuesday, Glencore said 78% of the new placements would be underwritten by Citigroup Inc and Morgan Stanley while the remaining 22% of the shares will be acquired by the company's senior management including Chief Executive Ivan Glasenberg, Chief Financial Officer Steven Kalmin and several board members.

The company will disclose the price of the new stock once Citi and Morgan Stanley complete the process of allotting the shares. Barclays PLC is also involved in the process. The new shares will be allowed to trade on Sept. 21.

Shares would be offered to both new and existing institutional investors. Had Glencore issued new stock representing 10% or more of its shares, the move would have been more cumbersome, requiring that all new stock be offered to existing shareholders on an equal (or pre-emptive right) basis.

The company's share price fall early in the day may have forced its hand in issuing new stock. If the company had issued the stock when it was trading lower, it may have needed to issue more than 10% of its share capital to reach the $2.5 billion equity raise.

The measures are among the most drastic taken by any mining company in a sector that has been racked by falling prices for everything from iron ore to oil to copper as demand in China wanes and supplies build up.

Glencore, a trading company founded by controversial financier Marc Rich and built into a mining powerhouse by Mr. Glasenberg, has been the worst hit. Its shares have fallen nearly 60% since the beginning of the year and more than three quarters since its London share listing in 2011. Competitors like Rio Tinto PLC and BHP Billiton Ltd. have also suffered but not as bad, losing 20% and 15%, respectively this year.

For Glencore, the reason for the poor performance is the continued collapse in a basket of commodities prices including copper and coal, two of its most important earnings drivers.

Glencore is the world's largest thermal coal exporter and largest copper supplier. Since Glencore bought mining giant Xstrata in 2013, prices for those two commodities, and several others, have fallen to multiyear lows.

Copper dropped to a more than six-year low last month.

The benchmark thermal coal prices in South Africa and the Netherlands were hovering at $51.95 a metric ton and $50.90 a ton respectively on Tuesday, a multiyear low since the onset of the financial crisis in 2008. A third benchmark thermal coal price in Australia was hovering at $57.65 a ton, down 6.9% this year.

Josie Cox contributed to this article

Write to Alex MacDonald at alex.macdonald@wsj.com.

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(END) Dow Jones Newswires

September 15, 2015 14:09 ET (18:09 GMT)

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