Glencore Intl Prices $2.2B Convertible Offering

Swiss commodity trader Glencore International AG on Wednesday sold as much as $2.2 billion of convertible bonds to investors, including private equity firms and sovereign wealth funds, in what could be a prelude to a $35 billion initial public offering.
The privately owned commodities giant said in an e-mailed statement that the buyers in the offering are New York private equity firm BlackRock Inc., Government of Singapore Investment Corp. Pte. Ltd., Greenwich, Conn.-based private equity investor First Reserve Corp. and Zijin Mining Group Co. Ltd., China's third-largest copper producer.
The four-year bonds, which are unsecured, can be converted to Glencore shares in an IPO or "other predetermined qualifying events," said the company, adding that the terms of the bonds give Glencore a pre-conversion equity value of $35 billion.
Glencore, based in Baar, Switzerland, has suffered in the past year from the slide in commodity prices, and its profit in the first nine months of 2009 declined 56% from a year earlier, to $1.8 billion.
Analysts cited in press reports believe the company will use the proceeds of the bond issue to buy back the Prodeco coal assets in Colombia, which it sold to mining company Xstrata plc for $2 billion in March. Glencore has a 34% stake in Xstrata.
Glencore said the offering was increased from between $1.5 billion and $2 billion because of strong demand.
"This transaction, in which Glencore is opening up its equity capital to outside investors, marks an important milestone as we embark on the next stage of our corporate development," the Glencore statement said. "As economic growth resumes, the outlook for most commodity markets is continuing to improve."
Glencore is owned by its employees and trades metals and oil and controls mines and smelters. In addition to its stake in Xstrata of Switzerland, Glencore has a 9.7% stake in United Co. Rusal, the world's largest aluminum producer.
Citigroup Global Markets Ltd. and Morgan Stanley have acted as advisers to Glencore.