Glencore Investor Harris Lauds $13 Billion Debt-Paring Plan

  • Investor hints at buying more stock given price weakness
  • Glencore shares plunged 73% in past year on China slowdown

Glencore Plc’s third-largest investor, Harris Associates LP, said the Swiss trader and miner is making great progress on a $13 billion debt-reduction plan designed to bolster finances during the commodities rout.

Harris has increased its stake in the company to 7.1 percent, from the 5.1 percent reported in its most recent filing in September, David Herro, who manages the $25 billion Oakmark International Fund, said in an e-mail to Bloomberg News on Friday.

“They’ve significantly de-levered already and more is coming for 2016,” Herro said earlier in an interview on Bloomberg Television. “They are taking a multi-pronged approach.”

Glencore’s billionaire Chief Executive Officer Ivan Glasenberg responded to growing investors fears about its $30 billion debt load last year by scrapping the dividend, selling new shares and announcing plans to offload assets. The stock slumped 73 percent in the past year as commodities tumbled and China’s economy weakened.

“These fears that a slowdown in China is just going to disrupt the world, I think are overblown,” Herro said. “If prices continue to drop below what we think is intrinsic value, these are reasons to add to stocks. One could conclude, given the weakness in Glencore, what we are probably doing.”

Glencore slid 1.6 percent to 77.48 pence in London, valuing the company at about $16.2 billion.

The firm has completed $8.7 billion of the planned $13 billion debt reduction. In November, it said it would target net debt of about $25 billion by the end of 2015 as the company moved to stave off a credit-rating downgrade to sub-investment grade. Glencore plans to sell more assets and net debt may fall as low as $18 billion by the end of 2016.

Herro spoke favorably about Glencore’s commodity-trading division, historically responsible for about a third of operating profits.

“Because the rest of the business isn’t earning much, that trading operation is doing more,” he said. “This is one of Glencore’s biggest competitive strengths.”

The company’s most important objective is to retain its investment-grade rating and cut mine production, Glencore Director John Mack, a former chief executive officer of Morgan Stanley, said last week.

“We are not backing out of trading,” Mack said. “We are as aggressive as we have ever been in trading.”

Peter Grauer, the chairman of Bloomberg LP, is a senior independent non-executive director at Glencore

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