* Fall in cobalt price has added to problems
* Glencore overhauling African business
LONDON, Nov 7 (Reuters) - Katanga Mining Limited, a big Congolese copper and cobalt producer, said on Thursday it would raise around $7.6 billion Canadian dollars ($5.8 billion) via a rights issue as part of a debt-for-equity swap with parent Glencore.
Katanga Mining will subsequently owe Glencore $1.5 billion, reducing its debt from $7.7 billion after experiencing setbacks including a fall in the price of cobalt from record levels of $95,000 per tonne in 2018 to around $35,000 now.
Thursday's statement said Glencore, which owns approximately 86.3% of Katanga, had agreed to swap $5.8 billion in debt for equity, which will raise its stake further in the firm. Remaining shareholders will also have the chance to take up the rights issue, but it is not yet clear whether they will.
The residual debt of $1.5 billion will remain outstanding until 2023.
Given the negative outlook for the cobalt market Katanga said its directors had agreed that recapitalising the company now was the best way forward.
The debt was scheduled to be paid by Jan. 1, 2021 and recapitalising now will be less dilutive in the event Katanga's creditworthiness deteriorates further.
Glencore's share price, which has fallen around 10% this year, was trading 1% higher by 1503 GMT.
Glencore enjoyed a sustained rally as the push for battery minerals encouraged investors to overlook the risk of operating in Democratic Republic of Congo.
But its share price has underperformed other major miners and its profits have dropped as Glencore has fallen into dispute with the Congolese government over a mining law and been subject to a U.S. Department of Justice investigation.
It said in July it had begun an overhaul of its underperforming Africa business.
In a note, Citibank analysts said the recapitalisation would have "limited impact" on Glencore's balance sheet.
$1 = 1.3162 Canadian dollars Reporting by Barbara Lewis, Clara Denina and Abhinav Ramnarayan; Editing by Elaine Hardcastle