ArcelorMittal today said it plans to raise $3.5 billion through selling shares and mandatorily convertible subordinated notes to reduce its debt.

"ArcelorMittal announces today its intention to offer common stock (the shares) and mandatorily convertible subordinated notes (the MCNs) for an expected amount of approximately $3.5 billion (the combined offering)," the company said in a statement.

The world's largest steel producer added that the net proceeds from the combined offering would be used to reduce existing indebtedness, which is over $23 billion.

"De-leveraging remains a priority for ArcelorMittal to retain strategic flexibility, and this offering, together with other initiatives, is expected to enable the company to reduce its net debt down to approximately $17 billion by June 30, 2013," it said.

Moreover, the shares of common stock will be offered with preferential allocations to existing shareholders, the company said.

"The Mittal family has indicated its intention to participate by placing an order in the combined offering for an aggregate amount of $600 million, and will be locked up for a period of 180 days," it added.

Commenting on the offer, company chairman Lakshmi Mittal said, "This transaction, supplemented by proceeds from ongoing asset disposals, the announced reduction in dividends and continued cost saving initiatives, will significantly lower our net debt and accelerate the achievement of a medium term net debt target of $15 billion."

The common stock and MCNs will be offered inside the United States pursuant to a registration statement filed with the Securities and Exchange Commission and globally, subject to certain customary selling restrictions, the company said.

The MCNs will have a maturity of 3 years and will be issued at 100 per cent of the principal amount.

Besides, it will be mandatorily converted into ordinary shares of ArcelorMittal at the maturity of the MCNs unless earlier converted at the option of the holders or ArcelorMittal or upon certain specified events as per the terms of the MCNs, the company said.

The MCNs are expected to pay a coupon rate between 5.875 per cent and 6.375 per cent per annum, payable quarterly in arrears.

Last week, the company had announced selling of 15 per cent stake in ArcelorMittal Mines Canada to Posco and China Steel Corporation (CSC) for $1.1 billion. The stake sell in the Canadian firm was also an attempt to cut debt of the company.