This page has been archived and commenting is disabled.
Glencore CDS Rout Continues, Curve Remains Inverted Even As Stock Rebounds On Sellside "Defense"
After its biggest daily crash in history on concerns Glencore's (or Glenron as it has been called recently) equity is worthless unless commodities stage a dramatic rebound (a crash which together with the plunge in Volkswagen has cost the Qatar sovereign wealth fund $12 billion in paper losses), the company's awestruck sellside following - the vast bulk of which has been defeneding a "buy" rating ever through the company's historic collapse, has decided to give it one last push, and double down all-in on their ridiculous, and massively money-losing "buy" recos.
First, it was Bernstein's Paul Gait (with a laughable price target of 450p - the highest on the street -or about 380p higher than the current price), which said it sees real economic value in both of Glencore’s businesses - clearly, hence the price target. The problem is it never saw the catalyst that slammed the stock to record lows. Bernstein continues that its assessment of commodity trading, a "fundamental building block of the global economy," as having suddenly lost fundamental value “seems absurd."
What Bernstein is unable to grasp is that "commodity trading" has not lost value at all, but it is Glencore's commodity trading that now faces a binary future, one where a downgrade from Investment Grade does in fact lose all value of Glencore's trading division, as the company simply can not continue to operate under its current liquidity regime with a "Junk" rating.
More from Bernstein, which also says that the market "appears to have an endless appetite to price the instantaneous present as if it were a fair reflection of everlasting reality,” which is “less than staggering in its intellectual profundity."
Because when you've been epically wrong, surely your best bet is to go ad hominem with the entire market.
Bernstein's bottom line: insolvency concerns are unwarraned even if the industrial assets continue to produce spot Ebitda margins at spot prices, and the trading unit contributes nothing, Bernstein still sees 93p of value.
Let's hope that Bernstein isn't as wrong about this as it has been about everything else involving Glencore. Because should the rout resume, we are confident Paul Gait will soon be looking for another job: perhaps the "solid" Glencore trading floor can hire him.
Then it was Citigroup's turn (which has a far more "reasonable" price target of 170p) with a note titled "Bottomless? - we don’t think so" in which the bank says "we believe there is potential upside to the $2bn target outlined from asset sales, including streaming and minority stake sale to strategic investor(s) in the agricultural business. The level of interest is likely to be high in both situations. We also think the group is not limited to just selling a minority stake and if the need be, the entire agricultural marketing business could be sold, which we value at ~$10.5bn."
And if all that fails, Citi's fall back is that the company's management will just take it private:
We believe that in the event the equity market continues to express its unwillingness to value the business fairly, the company management should take the company private, whereby restructuring measures can be taken easily and quickly, with a potential float of just the industrial business occuring further down the track.
There is one problem with that: Glencore's public debt, which unfortunately refuses to cooperate with the equity rebound, and at last check the CDS continues to be traded points upfront, with the 5Year CDS trading just over 900bps on a running spread basis.
Worse, the CDS curve continues to remain inverted:
In short: convincing equity that company is viable is one thing, and the company sure is trying:
- GLENCORE SAYS REMAINS OPERATIONALLY AND FINANCIALLY ROBUST:RTRS
... With the stock rebounding some 16% as of last check on hopes the worst may be behind us.
However, convincing the far more skeptical bond market, which is desperately trying to figure out the counterparty risk, will be far more difficult. As Reuters notes, "Glencore's €1.25bn April 2018 bonds dropped over 12 points to a cash price bid of under 78.00, before bouncing back a point, leaving the yield at 15.3%."
Good luck.
»
- 24225 reads
- Printer-friendly version
- Send to friend
- advertisements -
who got that big chrome enron sign?
Mr. Lay.....are you smoking crack?
I see dead cats bouncing
what goes up, most come down!
Expect a large technical bounce over the next few days........ then the big one will strike.
Kramer says buy buy buy
Just wondering how long it will be before China swoops in and buys the whole company out? This would be an epic takeover for them and they would only need to cash in a few billion more in U.S. T's to do it. Why not do it now before the evil scumbag banksters get their filthy greedy hands all over it?
A little more info on the Glencore situation from Mike Snyder: http://theeconomiccollapseblog.com/archives/is-glencore-the-next-lehman-...
How much is Kramer being paid to say that? Nevermind, some poor shmuck granny in Iowa will believe Kramer and invest for he pension believing his advice is impartial....lol
Yeah, like Cramer is ever going to NOT FUCK OVER EVERYONE who will listen to him. But... maybe this time is different.
Microcache bought the ENRON sign on I45 Houston,TX. Whole room walked in and saw it, it was like what?! God d crazy wow. Wouldn't u? Think a high dollar collector bought it off them know. Wish I had took a pic had ancient phone then.
Whatever you do, don't look down...
DaddyO
price discovery? Here let me help you out, its true value is zero.
Now, fuck you, pay me.
F'ing shame....
https://www.youtube.com/watch?v=5ydqjqZ_3oc
It's not quite zero, it's the age old nail biting debate of the skunk-vs- the giraff, relevant today, and tomorrow.
Nah, all the prices are the same as they say, just with a negative sign added in front.
what are you going to do mr. Yellen
Thanks for the Glenron pic Tyler, it made me LOL.
Of course Glenron is going to go down, The Vampire Squid published the roadmap on how to take them out ( after of course GS had finalized their positions to profit from the kill).
Today's price action in the stock is just a drowning person getting a last gasp of air before going back under the water and resuming their swimming like a rock campaign.
Don't be suckered in on the long side of the trade, this fucker is going down like Hillary Clinton on Huma's muff....
Today's action is to squeeze out any weak hands and to load up on shorts. Pretty much standard operating procedure from here to the end.
With Glencore's stock at such discount prices, we recommend buying NOW.
BUY, BUY YOU SHEEP. OBEY.
"discount"
"in the event the equity market continues to express its unwillingness to value the business fairly"
I LOL'D
Is this the point where you ballsacks with eyeballs say things like "the stock is oversold" and "fundamentals don't suggest such low prices" or how bout "metals are finite and the ground is almost picked clean, so it's a stone cold steal at these level!" C'mon guys say it, ya know you want to.....
If I had a few billion in cash lying around, I'd spend a few thousand buying some of their shares. Then again, I'm looking at it as a lottery ticket with a binary payout of bajillions or nothing.
Actually, you would ne better off playing the lottery than going long on Glenron. You would have better odds winning the lottery because fhere is ZERO chance Glenron survives. Goldman says so.
and that's why you don't have a few billion lying around. Its ok, yea me too.
http://www.businessinsider.com/the-animated-gif-of-boy-throwing-money-ou...
I'd be surprised if Glencore trades above 50p by Friday.
Bond guys are right, this sucker is going down.
Is this the 2015 Lehman?
No just the first dead body to float to the surface.
Actually, the WTI crude and Dr. Copper bodies have been floating around on the surface already for quite some time now. And they show no sign of life...
only question remaining is what time of day the stock market breaks today.
Can't break. Look how fast it's going up!
That happened while I typed. LOL what a joke
PPT at work...
In the "mark-to-make-believe" world, just start with the assumption the finance-based business is insolvent. What you want to value is the political connections of the key personnel. In other words, how close is the crab louse to the Golden Balsack?
This comment is off topic but we need your help and it just might save the lives of your friends and family on 1000's more people you will never know. Please sign this petition to get the Red Cross and United Way to stop donating and installing dangerous ionization smoke alarms that do not detect smolding smoke which has resulted in 10' of 1000's of smoke inhalation deaths and 100's of 1000's fire injuries over last 40 years.
The ion manufactures have been sued several times yet still market these dangerous devices bcause they are cheaper to make than the safer photoelectric alarms so they make more profit selling the cheaper often deadly ion alarms. Thanks for your support !
https://www.change.org/p/gail-mcgovern-american-red-cross-internationa-federation-of-red-cross-and-red-cresent-societies-brian-gallagher-united-way-demand-red-cross-and-others-stop-installing-ionized-detectors-and-warn-public-of-dangers
WTF? A product is being sold that actually cannot do as advertised? "Shiver me timbers"
http://i.imgur.com/H9sB7qS.jpg