Glencore Plc, the commodities group that’s lost almost $50 billion in market value this year, rallied in London as analysts said the rout probably didn’t reflect its true value and Citigroup Inc. wrote the management should consider taking the company private.
The Swiss company rose as much as 11 percent on Tuesday, clawing back some of the 29 percent slump yesterday driven by concern the company has too much debt to withstand the declines in commodities. Even so, Glencore’s credit-default swaps rose again today, signaling that the company has a 56 percent chance of default in five years, according to data from S&P Capital IQ’s CMA.
“The pummeling of Glencore yesterday was irrational,” Robin Bhar, an analyst at Societe Generale SA, said by phone from London. “Unless you think commodity prices are going close to zero, then this was overdone.”
Glencore has been embroiled in a China-led slowdown that’s hit prices for commodities from oil to copper to coal, heightening investor concern about its debt and sending the shares down 77 percent this year. To cope, Chief Executive Officer Ivan Glasenberg is working on a debt-reduction plan that includes selling assets, halting the dividend and a $2.5 billion share sale completed earlier this month.
‘Massive Contagion’
“The guy who can do the best signaling around this is Ivan,” Legal & General Group Plc Chief Executive Officer Nigel Wilson said in an interview with Bloomberg Television. “Lack of signaling creates lack of information, which is causing a huge amount of uncertainty in Glencore, which is having a massive contagion effect right across the world.”
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