PARIS -- Top global steel producer ArcelorMittal (IW 1000/ 35) announced Wednesday plans for a stock and subordinated notes offer to raise $3.5 billion to reduce its massive debt that has worried investors.

"ArcelorMittal intends to use the net proceeds from the combined offering to reduce existing indebtedness," the company said in a statement.

The announcement initially sent ArcelorMittal shares down more than 5% in afternoon trading on the Paris stock exchange.

They clawed back some ground later however to stand down 2.42% at 13.09 euros in afternoon trading while the overall Paris market was up 0.36%.

An Unexpected Announcement

"The market was taken a bit by surprise by the announcement, all the more so given the amount is not negligible," said one Paris trader.

The offering of common stock and mandatorily convertible subordinated notes would be made in the United States, said ArcelorMittal, and reserved the right to adjust the proportions.

"Deleveraging remains a priority for ArcelorMittal to retain strategic flexibility," said the company.

It said the offering plus other measures should enable the company to reduce its net debt to approximately $17 billion by the end of June, from about $22 billion at the end of 2012.

The three top ratings agency's stripped ArcelorMittal of an investor-grade rating at the end of last year, citing the company's massive debt amid sluggish global steel sales.