Glencore slumps to record low, erasing gains since debt plan

Glencore plans to scrap its dividend, sell assets and is working on a share sale of as much as US$2.5 billion to help trim its borrowings.
Glencore plans to scrap its dividend, sell assets and is working on a share sale of as much as US$2.5 billion to help trim its borrowings.PHOTO: BLOOMBERG

LONDON (BLOOMBERG) - Shares of Glencore Plc slumped to a record low, erasing gains since announcing a US$10 billion (S$14.08 billion) 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 per cent to 118.1 pence in London trading and was 4 per cent lower at 122.75 pence by 12:38 p.m (7.38pm Singapore time). That's lower than the 123.15 pence closing price of Sept. 4, the trading day prior to Glencore's announcement of the debt- reduction plan. The stock advanced 8.7 per cent 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 US$2.5 billion 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 Plc 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 on Tuesday 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 Ltd., Canada's largest diversified miner, was stripped of its investment-grade 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 power-plant coal. The fuel for next-year delivery in northwest Europe dropped 0.5 per cent to US$50.65 a metric ton, matching its lowest for at least eight years, according to broker data.

Futures for coal loaded at the Newcastle terminal in Australia have declined 16 per cent over the past 12 months and are at US$55.90 a ton, close to the US$54.65 traded on April 10, which was the lowest since at least December 2008.

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