Glencore extends rebound as turmoil shows easing signs

BloombergLondonGlencore has recouped most of the losses from Monday’s 29% plunge as the shares rebounded for a second day on higher metal prices and speculation the stock is cheap.The company, run by billionaire Ivan Glasenberg, rose 11% to 88.88 pence, bringing the two-day gain to 30%. The stock still needs to climb another 9.4 pence to recover the losses from Monday’s selloff. It’s still this year’s worst performer on the UK’s benchmark FTSE 100 Index, down 70%.Glencore has been on a roller coaster this week with the stock plunging on concern it’s overloaded with debt, and then snapping back after the company released a statement saying the business is financially robust and has no solvency issues. The recent slump was excessive and Glencore is undervalued at current commodity prices, analysts at JPMorgan Chase & Co said Wednesday in a report. It warned that more capital may be needed to eliminate credit risks.“The market got scared,” said John Meyer, a mining analyst at broker SP Angel Corporate Finance in London. “It was Glencore’s flash crash based on momentum rather than reality. I think Glencore’s stock will continue to climb.”Glencore’s €1.25bn ($1.4bn) of 1.25% bonds due March 2021 rose 6 cents on the euro to 76 cents, according to data compiled by Bloomberg. They reached a record low of 68.9 cents on September 28, the data show.The company said in a statement Tuesday that it has “absolutely no solvency issues,” good liquidity, no debt covenants, strong credit lines and secure access to funding. Before the statement, analysts said the recent rout probably didn’t reflect its true value and Citigroup Inc wrote that management should consider taking the company private.“A rather defensive statement from Glencore, but understandable considering the turmoil of the last few days,” Numis Securities said in a note to investors yesterday.Investors including Legal & General Group had pushed the firm to break its silence, saying the company faced a “quasi-Lehman moment,” where rumours about its viability hurt the stock amid a lack of information from its leadership. Glencore has been embroiled in a China-led slowdown that’s hit prices for commodities from oil to copper to coal, heightening concerns about its debt.Copper climbed as much as 2.5%, the most in three weeks, on the London Metal Exchange. Collahuasi, the giant Chilean copper mine owned by Anglo American and Glencore, said it plans to reduce production as the global metal price meltdown deepens. Five of the six main metals on the LME gained today, with nickel advancing as much as 1.9% to the highest in more than a week.To offset declining commodity prices, Chief Executive Officer Ivan Glasenberg is working on a debt-reduction plan that includes selling assets, halting the dividend and a $2.5bn share sale completed earlier this month. The company has hired Citigroup and Credit Suisse Group to sell a minority stake in its agricultural business, a person familiar with the situation said Friday.At its height in 2014, Glencore was worth more than $85bn after its $29bn all-share takeover of Xstrata, then the world’s biggest coal exporter. Now, the market value has shrunk to below $20bn as investors fled the company, which carries more debt than its rivals to fund its trading business.The company has a total debt-to-equity ratio of 104%, according to Bloomberg data. That’s more than double its rivals at Rio Tinto Group and BHP Billiton.Glencore, based in Baar, Switzerland, trades everything from wheat to oil to cobalt. It’s the world’s biggest exporter of power-station coal, with more than 30 mines in Australia, Colombia and South Africa and is among the top three agricultural exporters in Russia, the European Union, Canada and Australia. The company controls more than 150 mining and metallurgical, oil production and agricultural assets and employs about 180,000 people.Peter Grauer, the chairman of Bloomberg, the parent of Bloomberg News, is a senior independent non-executive director at Glencore.