2015-09-29

Glencore Another Lehman? Commodity Prices Affecting Credit Markets



UPDATE: September 29, 2015: Glencore Feels the Pain from China-led Slowdown - Glencore Plc rebounded in London trading a day after the stock fell 29 percent to a record low on concern is debt pile its too large to withstand a prolonged slump in commodity prices. Glencore has been caught up in a China-led slowdown that’s hit prices for commodities from oil to copper to coal. Billionaire Chief Executive Officer Ivan Glasenberg is working on a $10 billion debt reduction plan that includes the sale of assets, shelving of the company’s dividend and a $2.5 billion share sale completed earlier this month.



Glencore may spark a Lehman moment for miners (CNBC)"Hong Kong-listed shares of the Anglo–Swiss commodity giant crashed 27 percent on Tuesday after its London-listed shares plummeted 29 percent in the previous session amid fears about its financial health. A widely-circulated note from Investec [investec.com] on Monday pointed to a debt base well above peers and a lower-margin asset base, warning of a scenario in which earnings could collapse entirely as the firm works purely to repay debt. That would eliminate all shareholder value, the brokerage warned."

Glencore reportedly also has many counter-party transactions, so concerns about a domino effect and the leverage of other parties are high--

"Glencore is like Lehman Brothers, they have the most sophisticated trading desk when it comes to metals, coal, copper, iron ore. They're not just a company processing ore from the ground. If it was to unravel, that could have a global impact... Cheap money has fueled companies for so many years, so to an extent we've been living in cuckoo land. But all this money has not had the desired effect. At some point, we have to let companies go bust so the good companies can actually do well."--Frank Holmes, CEO and chief investment officer at U.S. Global Investors (source: CNBC, supra)

Domain Name: glencore.com

Stock exchange: Symbol - LON: GLEN

Glencore plc is an Anglo–Swiss multinational commodity trading and mining company headquartered in Baar, Switzerland, with its registered office in Saint Helier, Jersey.(Wikipedia)



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