LONDON (AP) - Shares in commodities group Glencore bounced back Tuesday but still have a way to go to recoup losses from the previous day, when investors fretted over the company's ability to service its sky-high debts at a time when many commodity prices are at multi-year lows.
LONDON (AP) — Shares in commodities group Glencore bounced back Tuesday but still have a way to go to recoup losses from the previous day, when investors fretted over the company's ability to service its sky-high debts at a time when many commodity prices are at multi-year lows.
In late morning trading in London, the share price was up 12.7 percent at 77 pence. That's only a modest recovery from the 29 percent plunge suffered Monday after Investec Securities warned that the company could end up "solely working to repay debt obligations" if commodity prices don't recover. The shares at one stage hit an all-time low of 67 pence.
On Tuesday, analysts at Citigroup, which recently helped the company raise cash, said the fall in Glencore's share price — about 80 percent from its high in May — has been "overdone" and suggested that it could raise more money from the sale of investments than the $2 billion it has penciled in.
Earlier this month, Glencore said it would sell assets, suspend dividends and raise cash from new and existing shareholders in the hope of reducing debt by $10 billion. But even if that plan plays out as expected, Glencore will be left with a debt mountain of around $20 billion, which is above its market value — after Monday's share price plunge, Glencore's value stood at about $15 billion.
China's economic downturn is at the heart of Glencore's difficulties. Mining and commodities companies sought to take advantage of the country's booming growth at the turn of the decade, when many of the world's leading economies were struggling to emerge from the global financial crisis and ensuing recession.
Citi's analysts said Glencore's management should consider taking the company private "in the event the equity market continues to express its unwillingness to value the business fairly." Doing so, they added, would allow the management to undertake restructuring measures "easily and quickly" and to prepare for an eventual float of the industrial business.
Sentiment toward Glencore PLC, which is based in Switzerland but listed in London, has been fragile for months as investors worried over the impact of falling commodity prices.
Glencore, which was founded in 1974 by the late commodities trader Marc Rich, floated in 2011 at a share price of 530 pence, a listing that valued the company at a little less than 40 billion pounds ($60 billion) and made several of the company's executives, including CEO Ivan Glasenberg, billionaires.