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Freeport debt downgraded to junk, CDS spread spikes

Freeport CDS spread
Freeport McMoRan is one of the biggest mining companies on the planet. Falling copper prices and too much debt are cratering the company and its stock price. They employ 80,000 people. There will be pain. Moodys just downgraded their debt to low-end junk. Their CDS spread is now over a whopping 2000, which means insuring $1,000,000 of debt for five years will cost $200,000+ a year. Do the math. At the end of five years the payments will equal the amount of debt. Clearly, Mr. Market does not expect Freeport to survive in its current form.

Adding to the carnage, CDS are a bankster wet dream, allowing endless private deals buying and selling faux insurance on bond repayments. So, if Freeport collapses, which looks likely, no one really knows where the CDS risk is because it’s all private. Silly amounts of debt and reckless speculation are of course what has made our country and stock market a model for all the world to emulate.

Expect even more downgrades not only for FCX but for all its peers, and certainly for Glencore which we expect will be downgraded any moment.

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