Shares in mining and trading company Glencore fell almost 30 percent and closed at a record low on Monday over concerns it is not doing enough to cut its debt to withstand a prolonged fall in global metals prices.
About 3.5 billion pounds ($5.33 billion) in market value was wiped off the Swiss-based firm, whose $10 billion share offering in 2011 turned its managers into billionaire shareholders but left it saddled with debt – a growing problem as commodity prices fell.
Chief executive Ivan Glasenberg had to bow to shareholder pressure this month by agreeing to cut debt as worries mounted over the firm’s ability to protect its credit rating.
Glencore has said it will suspend dividends, sell assets and raise cash, among other measures, to cut its $30 billion debt pile and protect its rating after the prices of its main products, copper and coal fell.
The fall followed publication of a note by analysts at investment bank Investec which raised doubts about Glencore’s valuation if spot metal prices do not improve. The note pointed to high debt levels and a need for deeper restructuring.
“If major commodity prices remain at current levels, our analysis implies that, in the absence of substantial restructuring, nearly all the equity value of both Glencore and Anglo American could evaporate,” the analysts wrote.
London-listed Glencore has already raised $2.5 billion through a share placement, part of a wider plan to cut its net debt.