CASH CALL BOOSTS GLENCORE AFTER SHARES HIT NEW LOWS

GLENCORE’S shares slumped to a record low yesterday before the commodities giant confirmed it had issued 1.3bn of new shares – or nearly 10pc of the company – to pay down debt amid the threat of a credit rating cut, writes Laura Chesters.

Fears about the commodity giant’s debt mountain led it to announce drastic action last week and the company yesterday confirmed a planned equity issue.

As part of a wider plan that includes cost cutting and spending cuts, the £1.62bn equity issue will see 22pc of the newly issued shares – around £356m – bought by its nine senior partners, including chief executive Ivan Glasenberg ( pictured) who is Glencore’s second largest shareholder with more than 8pc of the company, to ensure they do not dilute their ownership.

The remaining 78pc of the new shares are underwritten by banks Citi and Morgan Stanley. The issue, known as an accelerated bookbuild, was expected to close last night. The large size of the issue will dilute thousands of ordinary shareholders.

Glencore’s shares plunged yesterday to an all-time low of 118.1p as the commodity price rout continued with coal becoming the latest casualty. Traders took flight on news that thermal coal price benchmarks had fallen to six year lows yesterday.

Glencore, like other resources firms, has been hit by the stalling of China’s economy which has led to the price of everything from iron ore to copper to tumble.

Its shares have lost more than 75pc of their value since it floated in 2011 and more than 50pc since the start of the year. They finished the day up 0.15p to 128.05p.

The new equity and costcutting is designed to reduce its debts by a third to around £13bn by the end of next year.

It has also suspended future dividends. However the cost of buying new shares for the nine directors comes in at less than a quarter of the total dividends they have already received since floating the company, with Glasenberg receiving nearly £500m.

The shares will be issued on Monday at a price close to last night’s closing price. The share issue also highlights Glencore’s ill-timed share buy back programme last year, much of which took place when shares were between 280p and 330p.