UPDATE 2-Wesfarmers exploring share sale to refinance debt

(Recasts with company statement, adds analysts comments)

By Denny Thomas

SYDNEY, April 17 (Reuters) - Australian retail-to-power conglomerate Wesfarmers Ltd (WES.AX) could explore a share sale to help refinance $3 billion in debt used to buy retailer Coles, as a global credit crisis makes debt funding difficult and more expensive.

Wesfarmers, which earlier on Thursday asked for trading in its shares to be halted, said it was considering all options, after a media report said the company was seeking equity capital to partly refinance its A$18 billion ($17 billion) Coles Group acquisition, Australia's biggest takeover deal.

"An equity raising is more of a possibility than it was (because of higher debt costs)," said FW Holst & Co analyst David Spry. "I'm not sure it was the way they would have preferred to go when they executed this transaction.

"I don't think they were contemplating an equity issue, but of course times have changed since then and you have to rethink your strategy, your debt profile, and your capital structure etc," he added.

Earlier this month, Wesfarmers sold $650 million of bonds in the United States, less than expected and at a higher cost, and it had to include protection measures for investors while dropping a planned second tranche, market sources told Reuters [ID:nSYD149988].

It was also expected to sell a eurobond in April, but plans were postponed after the company decided to review its refinancing options, other market sources said.

Wesfarmers, which has around A$3.3 billion to refinance by October, said it expects to provide details of its refinancing plans next week.

"If Wesfarmers were to choose to pursue an equity raising ... it would strongly favour an outcome that would give all eligible shareholders the opportunity to participate," Wesfarmers Managing Director Richard Goyder said in a statement.

He said the company was well advanced in preparations for completing the refinancing.

The global credit crisis has dampened investor appetite for bonds and caused havoc to shares of many highly-geared Australian companies such as Allco Finance Group Ltd AFG.AX, childcare operator ABC Learning Centres Ltd ABS.AX and Centro Properties Group Ltd (CNP.AX).

Investment banks including Credit Suisse (CSGN.VX), GoldmanSachsJBWere, ABN AMRO AAH.AS and Macquarie Group (MQG.AX) were thought to be lining up as underwriters, the Australian Financial Review newspaper said, citing no sources.

"An equity raising has always been a possibility but a multi billion dollar raising would be more than we expected and would significantly reduce refinancing risk," Deutsche Bank credit analyst Colin Tan said in a note to clients.

He said Wesfarmers also has an additional about A$2.5 billion in short-term maturities due.

Tapping the eurobond market could still be an option, bankers said, with one telling Reuters he could see the company raising A$2 billion in equity and A$1 billion in eurobonds. But it would all come down to price, another added.

"The eurobond markets are open at a price. They are improving every day and Wesfarmers could access the market at the right price," said a banker in Hong Kong.

Wesfarmers is rated BBB+ by Standard & Poor's and Baa1 by Moody's. ($1=A$1.06) (Additional reporting by Cecile Lefort and Ben Wilson) (Editing by Jonathan Standing & Ian Geoghegan)