Glencore plunges 25% as miners slump again

It also announced it will stop paying dividends to its shareholders.

European equities sank on Monday as more disappointing Chinese data and downbeat analyst comment weighed on the mining sector, with London-listed Glencore hit the hardest.

“In the current climate, debt is fast becoming the most important consideration”, Hunter Hillcoat and Marc Elliott, analysts at Investec, wrote in a note to investors.

Glencore might introduce a tougher restructuring strategy in order to avoid its final demise.

The company is grappling with tumbling commodity prices as China’s economic slowdown weighs on demand for raw materials.

Glencore hopes to generate up to $12bn (£7.9bn) from the sale of its grains business to reduce its debt burden.

Shares of Glencore were down 10.0 percent at 87.49 pence at 0340 EDT after falling to a record low of 86.20.

Glencore’s shares are down 74 per cent so far this year, making it the worst performer out of the blue chip index and are down more than 80 per cent since listing its shares in London in 2011.

In the eurozone, Frankfurt’s DAX 30 finished 2.12 percent lower at 9,483.55 points and the Paris CAC 40 plunged 2.76 percent to 4,357.05. The cost of insuring Glencore’s debt against default rose to 669 basis points on Monday, according to data provider CMA.

The company has hired Citigroup Inc. and Credit Suisse Group AG to sell a minority stake in its agricultural business, a person familiar with the situation said Friday.

Analysts are anxious that Glencore may have to take further action to safeguard its investment grade credit rating if commodity prices fall further.

Glencore slumped 29 per cent – its biggest one-day drop – to an all-time low after a Investec raised doubts over the mining and commodities company’s valuation and high debt levels. But if prices do not improve from spot levels, 100% of the company’s core earnings could be swallowed up by debt repayments, the brokerage and asset manager said.

The Investec analysts said that without major restructuring, Glencore and another debt-laden mining firm, Anglo American, could see their value “evaporate”.

China’s industrial profits fell 8.8% on year in August, extending July’s fall as the slowing economy hit enterprises’ profitability. China is the world’s biggest consumer of commodities.

Having suffered a massive crash of its market capitalization during the past 12 months, Glencore is now selling its least lucrative subsidiaries, stirring a significant concern amongst global commodity investors.

Peter Grauer, the chairman of Bloomberg LP, the parent of Bloomberg News, is a senior independent non-executive director at Glencore.