Its shares were up 16 percent at 79.43 pence by 1504 GMT. “Investors returning to the market with a renewed sense of confidence have had their bubble burst once again as Chinese economic data continues to disappoint”, said Mike McCudden, head of derivatives at online broker Interactive Investor.
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“Glencore has no debt covenants and continues to retain strong lines of credit and secure access to funding thanks to long-term relationships we have with the banks”, the statement read.
City analysts locked horns on Tuesday over the merits of holding shares in under the cosh global commodity giant Glencore (LON:GLEN), with United States firm Citi saying the sell-off was “overdone”.
Goldman Sachs Group Inc. said last week that Glencore’s recent steps to reduce debt and bolster its balance sheet are inadequate.
But even if all that plays out as expected, Glencore will be left with a debt mountain of around $20 billion, which is still above its market value – after Monday’s share price plunge, Glencore’s value stands at about $15 billion.
Earlier, Glencore found support from analysts at Citigroup, which recently helped the company raise cash through a placing of shares with new and existing shareholders.
Shares of Australian mining heavyweights BHP Billiton and Rio Tinto were also down more than 5%.
Analysts warned that Glencore’s massive losses Monday were not justified, with several suggesting the mining giant should delist to shield itself from the abuse.
Speaking to the BBC, Investec’s Laura Lambie said: “Miners grew hugely to meet the demand from China and they borrowed heavily to find it and the cost of servicing that debt and the schedule of repayments are really putting companies such as Glencore under the spotlight”. Such a move would make it easier to restructure while metals prices are slumping and could allow various assets to be spun off. The company has already said it will suspend dividends for at least 12 months and is preparing asset sales. Zacks upgraded shares of Glencore worldwide PLC, St. Helier from a “sell” rating to a “hold” rating in a report on Wednesday, September 9th. Just two weeks ago, management took up 22 percent of the new shares being issued at 125 pence each.
Glencore’s net debt to equity ratio has been of particular concern to investors.
Glencore is Australia’s biggest producer of thermal coal and one of the main grain exporters from the country, according to the company’s website.
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However, Investec believes that these changes will be insufficient, and that the company might have to undertake further restructuring to realize its aims.
