RECORD DECLINE
Glencore share price plunges since announcing a debt-reduction plan
SHARES of Glencore slumped to a record low, erasing gains since announcing a $10 billion (R135bn) debt-reduction plan designed to reassure investors amid mounting concern about the commodity trader and miner’s borrowing load.
The stock slumped as much as 7.7 percent to £118 (R2 441) in London trading and was 4 percent lower at £123 by 12.38pm. That is lower than the £123.15 closing price of September 4, the trading day prior to Glencore’s announcement of the debt-reduction plan. The stock advanced 8.7 percent last week, its biggest weekly gain in more than three years.
Glencore plans to scrap its dividend, sell assets and is working on a share sale of as much as $2.5bn to help trim its borrowings. A rout in commodity prices has eroded profits, raising concern that credit agencies may cut their rating on Glencore’s debt.
“If the trend continues it will accelerate their need to do a deal,” said Marc Elliott, an analyst at Investec in London who has a sell rating on the stock. “There remains uncertainty. They haven’t gone ahead and said what the price is and what the equity placement is going to be.”
Still, a rally in copper prices may quickly reverse the trend and Glencore investors with short positions would likely get squeezed in such a scenario, further lifting the stock, he said. A spokesman for Glencore declined to comment.
Copper retreated for a third day yesterday amid concern over an economic slowdown in China, the world’s largest consumer. The country’s benchmark share index posted its biggest two-day loss in almost three weeks.
Teck Resources, Canada’s largest diversified miner, was stripped of its investmentgrade rating by Moody’s Investors Service on Monday as falling prices of everything from coal to zinc overshadow cost-cutting efforts.
Glencore is the world’s biggest exporter of powerplant coal. The fuel for next year delivery in northwest Europe dropped 0.5 percent to $50.65 a ton, matching its lowest for at least eight years, according to broker data.