Agribusiness & Food, Mining and Heavy Industries

Glencore to sell agricultural assets in debt move

Grain. Photo: Shutterstock.

Glencore looks set to sell a minority stake in its agricultural business, which owns roughly 30,000 hectares of farmland across NSW, Victoria and South Australia.

The embattled mining and commodities trader further detailed its efforts to reduce its debt burden this week.

According to a report in The Australian, Singapore’s sovereign wealth fund GIC and Japanese conglomerate Mitsui have been linked to the sale process for the company’s agricultural assets, with the sale being run for Glencore by Citi and Credit Suisse.

Concerns over Glencore’s $71 billion debt pile wreaked havoc on its share price last week.

Glencore, whose shares were worth more than 300 pence on the London Stock Exchange as recently as May 5, slumped 30% in just hours on to as low as 66.7 pence on Monday last week, with growing concerns over the trader’s significant debt.

Market chatter was that the debt, coupled with poor market conditions in Glencore’s key mining commodities, meant the company’s stock could very well be completely worthless.

The company has a BBB rating and negative outlook at Standard & Poor’s, and a Baa2 rating and negative outlook at Moody’s credit agencies.

But the company’s share price has rebounded this week, closing at 117.85 pence on Tuesday.

The rebound could be in response to the company’s own confidence in the fund raising process, led by boss Ivan Glasenberg. Early in September when he announced the debt restructuring, Glasenberg said “recent stakeholder engagement in response to market speculation around the sustainability of our leverage highlights the desire to strengthen and protect our balance sheet amid the current market uncertainty”.

The company itself also reinforced the stability of its balance sheet last week.

“Glencore has taken proactive steps to position our company to withstand current commodity market conditions,” Glencore wrote last week from its headquarters in Baar, Switzerland.

“Our business remains operationally and financially robust – we have positive cash flow, good liquidity and absolutely no solvency issues.

“Glencore has no debt covenants and continues to retain strong lines of credit and secure access to funding thanks to long term relationships we have with the banks.

“We remain focused on running efficient, low cost and safe operations and are confident the medium and long-term fundamentals of the commodities we produce and market remain strong into the future.”


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