Analysts at Barclays had said that a meeting they’d with members of Glencore’s management addressed many concerns.
But it then tumbled back into negative territory, extending the week’s losses after suffering a 30% plunge on Monday.
Glencore being forced to sell a portion of its future gold and silver production to pay down debt is just another irony in a sea of ironies now taking place as Central Bank propped up highly leveraged stock markets are on the verge of another epic collapse.
“It was an encouraging meeting (on Wednesday) as we believe it helped to clear up many misconceptions and confusion we believe is now in the market around commodity trading”, credit analysts from Barclays said in a note on Thursday.
Glencore market jitters were triggered by worries that if the collapse in commodities prices over the past year persists for too long it will stretch the company’s ability to earn enough to service its debt. A recent share placing and suspending the dividend will help raise $10bn to cut its net debt by a third.
Glencore told investors and bondholders on Wednesday that it was on track to sell a stake in its agricultural business by yearly next year, according to Barclays. On 7 September 2015 Glencore announced a debt reduction plan to shore up its balance sheet.
Concerns centered on Glencore’s capacity to safeguard its investment-grade credit rating as commodity prices continue to fall amid a gloomy outlook for growth in China, the world’s biggest consumer of coal and copper among other natural resources.
It also hopes to complete a so-called streaming deal by the end of this year. The deals could generate around $2 billion, according to market estimates. While it has nearly $30 billion in net debt and as much as $18 billion in short-term credit used for trading. In a statement Glencore wrote “Our business remains operationally and financially robust – we have positive cash flow, good liquidity and absolutely no solvency issues”.
In a note Thursday, the bank said Glencore chiefs for corporate finance and strategy and communications dismissed concerns about the company’s high debt levels.
Even in the event of a credit downgrade, the current low-interest-rate environment means it would result in minimal costs that wouldn’t necessarily affect the company’s trading competitiveness.
“One of the misconceptions is that Glencore needs its investment grade credit rating for the marketing business”.
The extreme swings in share price moves at beleaguered miner Glencore continued yesterday as traders blamed its intraday move, from FTSE leader to laggard, on the return of hedge funds and short-sellers. The combination was supposed to make Glencore less susceptible to commodity-price downturns, but the borrowing needed to run a trading house and sustain its mines during a commodities slump has alarmed investors.