GLENCORE HAS YET TO CONVINCE INVESTORS The panicked sell-off may have stopped, but Glencore, the Swiss mining and trading company, still needs to convince investors and analysts that it is out of the danger zone, Stanley Reed reports in The New York Times.
The problems that have sent the stock reeling this summer remain, from its heavy debt load to the slowing Chinese demand for commodities. And, as Bloomberg News reports, investors are nervous that the 29 percent plunge in its share price could happen again.
Analysts doubt that Glencore is unable to pay its debt, but it will remain under pressure until it can address investors concerns about it.
The company has moved to cut its debt*, but this may not be enough. Commodity prices may have farther to fall and Glencore is dependent on forces that it cannot control.
Many have also struggled to explain exactly why the company’s stock should have plunged so suddenly on Monday. The fear that the drop caused reminded people of the moment that Lehman collapsed, a trader told Bloomberg News.
The company is trying to get back to business as usual, but damage has been done. Sellers of default insurance on Glencore bonds are demanding more compensation for the risk than a month ago.
A failure to deliver about three million pounds of cotton owed to Noble Agri, a rival commodities trader, has also intensified the spotlight on Glencore, The Financial Times reports.
That happened in May before the recent turmoil, but Glencore may have to pay a financial penalty and the failure to deliver comes at a delicate moment. Glencore is trying to sell a minority stake in its agricultural business, which includes cotton trading, to help pay its debt.
*It sold stock and cancelled its dividend and closed mines.