Daily Management Review

Glencore to sell assets in oil storages


Glencore, one of the world's largest commodity traders, is at the final stage of negotiations to sell part of its assets in oil storages after a period of growth in the oil industry, Reuters reports citing its own sources.

Department of Energy and Climate Change via flickr
Department of Energy and Climate Change via flickr
If the transaction takes place, Glencore is likely to receive minority stakes in the assets. The company owns the majority of its shares in storage terminals through joint ventures and is selling half of these shares, sources said.
Glencore’s press service declined to comment.

"This is an exotic combination of assets with various functions, mainly for storage", the source said, stressing that the portfolio includes assets in Argentina, Belgium and Madagascar.

In addition, Glencore decided to sell shares in two zinc mines to Canadian Trevali for approximately $ 400 million, which will allow the latter to become the largest zinc company in the Americas and Africa and to enter the top ten of the world's largest zinc producers. 80% and 90% interest will be sold in the Namibian Rosh Pinah and Perkoa in Burkina Faso. The transaction is expected to be completed by July, when regulatory approval is received.

Earlier in October, it became known that Glencore had sold its coal shipment unit in Australia to the American railway operator Genesee & Wyoming Inc. for 1.14 billion Australian dollars ($ 873 million) as part of a large program to reduce debt.

Glencore’s Head Ivan Glasenberg sold assets and shares, postponed dividend payments and reduced spending over the past year, as his company tried to survive in the market with low prices for raw materials.

He promised to reduce Glencore's debt to $ 16.5 billion by the end of the year, after a decline in prices last year sparked investors' concerns that the company could be piled under a tremendous amount of loans.

Some of Glencore's competitors have already got rid of similar assets or are planning to do so. Among them, for example, Vitol and Gunvor.

Long-term rating of Glencore, according to S&P, moved to the level of "BBB". The company's short-term credit rating has also been changed to "A-2", the national scale rating is "stable".

The rating agency improved the company's position due to the fact that Glencore strengthened its financial position in 2016, and its operating figures were ahead of the basic forecasts. The rating outlook was also raised against the backdrop of rising raw material prices, where Glencore improved financial sustainability to potential problems in the industry. Previously, Glencore was badly hit by falling commodity prices.

At the same time, S&P is confident that the company has promptly taken all measures to reduce the debt, and this allowed creating an increased financial resistance to possible problems in the industry.

So, the rating’s upgrade corresponds to improvement of the creditworthiness indicators after the company took particular actions to reduce the debt.

Against the backdrop of the rating change, the company’s stock quotes sharply increased in price and grew by more than 13.59%, while the price climbed up to the level of $ 317.25.

S&P notes that the company should carefully consider its further transactions in order to maintain the rating’s position. 

source: reuters.com