Glencore rallies as Citigroup advises going private

Glencore, the commodities group that's lost almost $50 billion in market value this year, rallied in London as analysts said the rout probably didn't reflect its true value and Citigroup wrote that management should consider taking the company private.

The Swiss company rose as much as 11 per cent on Tuesday, clawing back some of the 29 per cent slump yesterday driven by concern the company has too much debt to withstand the declines in commodities.

Even so, Glencore’s credit-default swaps rose again on Tuesday, signalling that the company has a 56 per cent chance of default in five years, according to data from SandP Capital IQ’s CMA.

"The pummelling of Glencore yesterday was irrational," Robin Bhar, an analyst at Societe Generale, said.

“Unless you think commodity prices are going close to zero, then this was overdone.”

Glencore has been embroiled in a China-led slowdown that’s hit prices for commodities from oil to copper to coal, heightening investor concern about its debt and sending the shares down 77 per cent this year.

To cope, chief executive officer Ivan Glasenberg is working on a debt-reduction plan that includes selling assets, halting the dividend and a $2.5 billion share sale completed earlier this month.

"The guy who can do the best signaling around this is Ivan," Legal and General Group chief executive officer Nigel Wilson said .

“Lack of signaling creates lack of information, which is causing a huge amount of uncertainty in Glencore, which is having a massive contagion effect right across the world.”

A spokesman for Glencore declined to comment.

- Bloomberg