Mining Company Glencore is down by 30 per cent closing at its lowest on Monday after Investec warned about huge debt troubles. Investec warned that Glencore’s valuation will suffer if metal prices do not improve. In turn, Glencore had announced the suspension of dividends and plans to sell its assets to raise money to help cut down its £21 billion debt pile. This was also Glencore’s CEO Ivan Glasenberg’s reaction to shareholder pressure.
Billions Wiped Off
Glencore lost about £3.5 billion from its market value. However, Glasenberg’s agreement to cut debt would help the company at least protect its debt rating. The low valuation of metals, including Glencore’s main products copper and coal, contributed to the downgrading of their prices.
Meanwhile, the directors and employees from Glencore who took up about 22 per cent of the company’s new shares may lose much in the next few days. However, investor and market confidence would still increase in the process.
Reason For Failure
Investec analysts said “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.”
Glasenberg, who holds a giant share in the company, believed it was better to fail in value than to miserably lose the company’s credit rating by being unable to pay its billions of debt.