Peters: The Glencore conundrum
My old friends Glencore came to market with a two tranche bond, €1.25bn at 6 years and an added £300mm at 10yrs. The pricing was kind of okay as was the performance in the after-market. However, I still can’t get my head around a company which is half short-term trading and half long-cycle mining investment.
If there have been conflicts within banking where the investment bankers with their “How much can I make” philosophy conflicts with the commercial bankers’ “How much can I lose” way of thinking has led to some toxic outcomes, the merging Glencore with Xstrata must inevitably lead to internal warfare of huge proportions.
Right now the boards of the two groups are all lovey-dovey but given the amount of money they’re all going to make out of this I am not at all surprised. Going forward, however, internecine warfare will most certainly break out in a major way and I don’t want to be anywhere nearby when the feathers start flying.
To me, Glencore remains on the “avoid” list both at equity and debt level. I remind that the IPO priced the shares at 530p last May – that is now nearly 25% lower at 400p where it has underperformed the FTSE 100, the FTSE All Share and the FTSE ASX Mining Index.