Glencore Plc’s billionaire chief executive caved this week to shareholder demands that the commodity-trader bolster its balance sheet. Now attention is turning to whether rival Anglo American Plc will follow.
The two companies have been among the hardest hit by China’s cooling demand for commodities on concern they’ll be unable to withstand raw-material prices at a 16-year low and pay off a combined $43.5 billion in debt. Measures might include cutting its dividend, which is yielding a record 9 percent, higher than the level in 2009, when the company last scrapped the payout.
The collapse in commodity prices is undermining Anglo’s Chief Executive Officer Mark Cutifani’s efforts to turn around the fortunes of a business that mines platinum and diamonds in Africa and iron ore in Brazil.
Glencore shares rallied the most in almost three years on Monday after the company outlined a $10 billion debt-reduction plan, including selling $2.5 billion in shares and suspending its dividend.
“If you’re going to have a problem, it’s better to rip the band-aid off than not,” said Rob Clifford, an analyst at Deutsche Bank AG in London. “Glencore just did it and the stock went up. So any companies who are thinking about strengthening their balance sheet might look at Glencore’s outcome and consider it as well.”
Anglo shares slumped 38 percent this year, a decline second only to Glencore in the U.K.’s FTSE 100 Index. The stock jumped 6.4 percent to 749.1 pence at 9:08 a.m. London time.
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