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Glencore scrambles on asset sales, debt concerns

Its stock still wobbly after hitting an all-time low on Monday, commodity giant Glencore fought this week to reassure investors, employees and counterparties, with mixed results.

Conscious of a self-imposed goal to reduce its net debt to $24 billion from the $30 billion it reported in late June, Glencore officials are scrambling to complete the sale of their metal-byproducts business at two mines in Peru, said people familiar with the transaction, with an eye toward announcing a $1 billion-plus deal in October.

At a director's meeting scheduled for October 9, Glencore executives also plan to discuss their upcoming production report and whether to reveal more details to investors than usual, these people added.

Read MoreGlencore shares financing deals with investors

Also high on the company's to-do list is a partial sale of its agricultural business, a deal Glencore's management hopes will bring in multiple billions of dollars, said a person familiar with the matter. That transaction, which would ideally involve one or more sovereign wealth funds buying between 20 and 30 percent of the grains unit, is in the works but unlikely to close until early next year, this person added.

Taken together, the metal-byproducts business, known as streaming, plus the partial sale of the agricultural unit and other recent measures will amount to a debt reduction over time of at least $10 billion.

A Glencore spokesman declined to comment on status of the various moves.

It has been a brutal week for the large trading and mining concern, which dominates copper, coal and other base metals trading, as well as having a substantial presence in energy and grains markets.

On Monday, after a negative research note and rumors of both short-term financing hiccups and margin calls on Glencore executive stock holdings that had allegedly forced internal investors to sell shares - rumors company insiders have vociferously denied - Glencore shares hit an all-time low of 67 pence on the London Stock Exchange.

Some analysts rallied to Glencore's defense the next day, helping the stock recover somewhat. Analysts at Citigroup, one of Glencore's chief advisers and lenders, pointed to a balance sheet that was stronger than the market perceived; others argued of a possible bottoming in thermal coal prices. At the same time, Glencore issued a statement that it had no financing issues and that its access to credit was unchanged.

Later on Tuesday, chief executive Ivan Glasenberg acknowledged the turmoil in a note to his employees in Baar, Switzerland, and beyond.


"You will be aware of the recent share price weakness and the associated negative press headlines," he wrote. However, he noted, a recent new-equity issuance to which management had contributed some $550 million was "a strong vote of confidence in the fundamentals of our business," adding that "our core business remains operationally and financially robust."

Glasenberg also noted that under Glencore's current credit structure, the company would not need to tap the banking system for new financing until 2017.

In a meeting with credit analysts held Wednesday in London, other Glencore officials reiterated those points. They also noted that the firm had access to $50 billion in short-term financing that backed its so-called trading business, in which materials like oil and coal are shipped from one location to another, through letters of credit.

That fact, as well as additional details on Glencore's relatively low cost of capital in its revolving bank-credit facility, reassured some attendees, according to a person who was at the meeting.

As Glencore shares, which fell again on Thursday, continue to fight for stability, hedge fund short-sellers have been widely blamed for pushing the stock down. Glasenberg himself criticized shorts for pressuring both copper commodity prices and Glencore shares in August, and traders quoted by London media outlets blamed shorts again this week for the recent tumbles.

Two hedge funds, London-based Lansdowne Partners and San Francisco's Passport Capital, have publicly acknowledged large short positions in Glencore, and analysts and traders say that using the company as a proxy to express a bearish view on mining and commodities more generally had become a popular move of late.