Glencore outlines impact of possible credit downgrade

The mining company has had a turbulent week, after a negative broker note from Investec sent shares plummeting to new 52 week lows.

Slowly the share price has recovered, crossing the 100p threshold again on Monday, but still has a way to go to reach its 52 week high of 344.52p.

In a bid to give confidence to investors, the FTSE 100 company issued a five-page summary of its financing arrangement.

It stated that committed available liquidity is materially above June’s level of $10.5bn due to the recent $2.5bn equity placement, the business’ positive free cash flow and the ongoing focus on other debt reduction measures.

It also said it is working to strengthen the balance sheet to maintain its existing credit rating.

Currently the company has a BBB rating from Standard & Poor's and a Baa2 rating from Moody’s, with a negative outlook from both.

Glencore said if it was downgraded one level down, there would be a modest step up in margins for its $6.8bn 5-year revolving credit facility.

It also claimed the maximum margin for a sub-investment grade rating is 1.1%.

A 125 basis points margin step up would apply to the company’s $4.5bn of outstanding bonds if they were rated sub-investment grade.

The market appeared to react positively to the news, with shares rising 2.75p to117.75 at 1626 BST.