2 reports attached from yesterday, really interesting to have a read after DBk today and banks reporting in the US next week...funny to notice that moste investment banks have turned bullish on commo & Materilas since we had this Glencore story...no banks really want this to happen...
We estimate the financial system's exposure to Glencore at over US$100bn, and believe
a significant majority is unsecured. The group's strong reputation meant that the buildup
of these exposures went largely without comment. However, the recent widening in
GLEN debt spreads indicates the exposure is now coming into investor focus.
Debt broadly spread
GLEN debt breaks down as US$35bn in bonds, US$9bn in bank borrowings, US$8bn in
available drawings and US$1bn in secured borrowings. We then estimate that the group
has US$50bn in committed lines against which it can draw letters of credit with which
to finance its trading inventories. Based on public filings, we believe that the banks may
have limited capacity to reduce even the undrawn portion of these lines until 2017.
GLEN have publicly stated its financing is largely locked in - but we believe that this may
not provide comfort to risk-averse bank shareholders and supervisors.