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The cost of
insuring Glencore Plc’s debt against default rose to a more than six-year
high as the price of raw materials such as copper continued to tumble.
The trader and miner’s credit default swaps increased
to as much as 946 basis points, the highest since April 2009 on a closing
basis, according to data from S&P Capital IQ’s CMA.
Slumping commodity prices
have battered Glencore, prompting it to scrap a dividend payment, sell new
shares and outline asset sales as it seeks to curb debt to maintain its
investment- grade rating. Copper dropped to a six-year low amid a rout in
metals as muted Chinese inflation increased concern that demand from the
world’s largest buyer of raw materials will slow.
“CDS levels are driven by
commodity prices and in the case of Glencore, especially copper,” said Max
Mihm, a Frankfurt- based portfolio manager at Union Investment, which holds Glencore bonds among assets
totaling about $271 billion. “If prices fall further and stay low
Glencore will need to do more to protect its IG ratings.”
A Glencore spokesman
declined to comment on its credit default swaps.
Copper for delivery in three months fell 1.9 percent to
$4,399 a metric ton as of 4:46 p.m. on the London Metal Exchange, the lowest
since April 2009. The Bloomberg World Mining Index of 80 equities fell for a
fourth day to the lowest since June 2004.
Glencore shares slid 5.2 percent to close at 73.43 pence
in London trading, the lowest since Sept. 28 when the stock collapsed 29
percent.
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