October 5, 2015 / 6:33 AM / 4 years ago

Glencore shares surge on agriculture asset sale hopes

MELBOURNE/LONDON (Reuters) - Shares in beleaguered trader and miner Glencore Plc rose on Monday on hopes it was on track with its debt-cutting plans with a sale of a stake in its agricultural assets.

The logo of commodities trader Glencore is pictured in front of the company's headquarters in Baar, Switzerland, September 30, 2015. REUTERS/Arnd Wiegmann

Glencore’s share price has lost more than 60 percent this year, battered by a collapse in global commodity prices over the past year and market jitters over the miner’s ability to service its heavy debts.

The Swiss-based trader has pledged to cut its net debt to $20 billion (£13 billion) from $30 billion, by selling assets, reducing capital expenditure, suspending dividend payments and raising $2.5 billion of new equity capital with a share sale completed earlier this month.

Reuters reported on Friday that Glencore is in talks with a Saudi Arabian sovereign wealth fund and China’s state-backed grain trader COFCO, along with Canadian pension funds, to sell a stake in the assets.

The company has said it was on track to sell a stake in its agricultural business by early next year, according to Barclays.

On Monday Hong Kong-listed shares of Glencore surged as much as 72 percent before closing up 18 percent at HK$12.6. The shares rose as much as 20 percent in early trade in London, and were up were up 7 percent at 0911 GMT, at 102 pence.

The stock has recouped all of its losses from the past week, with several brokers saying a recent sell-off was overdone as the company had the ability to withstand the crunch on commodity prices.

In a filing to the Hong Kong and London stock exchanges, the company noted the share price and volume movements, but said it was not aware of any reasons behind it.

Doubts had grown last week that Glencore would be able to pay down debt fast enough to withstand a prolonged slump in commodities prices. Its shares sank to a record low last week, down 87 percent from when it listed in 2011.

“While the leverage is clearly of concern it is not anywhere near an immediate existential threat to the company - it is an issue that needs to be managed, and that is exactly what the company is doing,” broker Sanford Bernstein said in a note on Monday.

Bernstein maintained an “outperform” rating on the stock with a target of 450 pence.

The broker’s comments echoed those made by Citi last week saying the commodity powerhouse does not need to go to bond markets before at least 2017, and that it has immediate access to liquidity of more than $12 billion.

“The belief that Glencore is having a ‘Lehman moment’ seems unfounded,” the broker said, referring to Lehman Brothers, which collapsed in 2008.

Glencore has said its business remained operationally and financially robust.

Reporting by Sonali Paul; Additional reporting by Melanie Burton and Olivia Kumwenda-Mtambo; Editing by Peter Graff

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