Enron. Lehman Brothers. And now possibly Glencore?
That was the discussion among financial markets participants as commodity prices took another hit and the Anglo-Swiss natural resource giant saw its share price collapse by 29 percent on Monday.
Glencore’s investment grade bonds are trading like junk bonds as credit default swaps (CDS) rose to levels of a CCC-rated company.
In many ways, Glencore seemed to be going down the path of bankruptcy with potential spill over effects to its industry and maybe even beyond. Financial markets can be quick to judge and when companies get caught in the negative feedback loop of speculation about business viability, lack of confidence in the company, and outright fear.
The fall in the price for commodities due to weakening demand and oversupply as global growth falters largely due to China’s economic transition have sent economies like Canada’s into a technical recession, but when combined with a high debt load, those factors almost brought down a company like Glencore.
