* Glencore moots eventual share sale - bankers
* Any listing years away, bankers say
* Glencore declines to comment
* Secretive nature has given it bumpy ride in CDS market
By Daisy Ku and Pratima Desai
LONDON, June 19 Glencore International AG's
bumpy ride in credit markets over the past year may prompt it to
seek a public listing but not for a few years, said bankers
familiar with the commodity trader's thinking.
Talks about an Initial Public Offering (IPO) are taking
place regularly, the bankers said, now that the secretive
Swiss-based group -- founded by Marc Rich and now one of the
world's biggest private companies -- is looking for more
"I'll be surprised if they were to sell a big chunk of their
shares now. If you are talking about the next three to five
years, that's possible," one of the bankers said.
The Financial Times reported on Friday that the group is
exploring a stock market listing to overcome the constraints of
its private ownership structure, a possible barrier to growth.
The company declined to comment.
Glencore's opaqueness manifested when the cost of buying
protection against default on its debt jumped to more than 3,000
basis points, a level way out of line with its investment grade
But its credit default swap (CDS) spreads have since fallen
to an eight-month low, tightening another 50 basis points on
Friday to 625 basis points after the report.
"The company is currently reliant on the debt markets for
funding, and the experience of the past nine months has
highlighted the limitations of this model," credit analysts at
RBS said in a research note.
For a story on Glencore CEO Ivan Glasenberg [ID:nLJ421660].
For a column on Glencore [ID:nLJ869718].
A listing would require Glencore, founded in 1974, to shed
its secrecy and become transparent, opening up its huge and
successful oil, coal and metals trading operations to scrutiny.
An IPO could give Glencore a market value of between $30
billion and $40 billion, Liberum Capital estimated.
Rich, the former U.S. fugitive who was pardoned by President
Bill Clinton in 2001 after 18 years in Switzerland to flee
charges of financial crimes, sold Glencore to management.
"When a generation that have built the business wants to
leave in the next decade or so, where will the capital come from
to buy them out of the partnership? New partners certainly can't
afford to buy their equity," Liberum said in a note.
Based in the affluent town of Zug, known for its low
corporate tax rate, the company has grown from a trading
enterprise into a major producer of raw materials, owning about
35 percent of UK-listed miner Xstrata XTA.L.
It also holds stakes in U.S. Century Aluminum (CENX.O),
Russian oil producer Russneft and aluminium giant Rusal, and
Australia's Minara Resources MRE.AX [ID:nSIN449965].
One of the reasons why the idea of a listing seems credible
are recent perceptions that the company has liquidity problems,
a concern that has hurt Glencore's CDS in the past. But analysts
said they were comfortable with its liquidity.
The recent signing of a $6.7 billion forward-start
agreement, a type of loan, and a $8.2 billion revolving credit
facility showed the strong relationship the company has with its
banks, UniCredit said.
"This is not the moment to take action. Glencore has no
liquidity problem," another banker said.
Standard & Poor's, which downgraded Glencore's debt to BBB-
last December, the lowest investment grade rating, said the
group will hit a refinancing need in May 2011, when $7.3 billion
of its debt matures.
In March, Glencore reported in a one-page financial
highlights statement that 2008 earnings before interest, tax,
depreciation and amortisation fell to $6.79 billion.
Another option for the group would be a merger with Xstrata,
Evolution Securities said in a note.
"(An IPO) would create too many public conflicts were
Xstrata to remain a separately quoted associate in view of the
trading links between the two organisations," Evolution said.
"Much better, we think, for Glencore and Xstrata to merge
and thereby consolidate their position through cutting the
overlaps that exist between the two groups."
(Reporting by Veronica Brown, Eric Onstad, Quentin Webb,
Natalie Harrison, Jane Baird, Steve Slater, David Milliken, Jan
Dahinten, Jonathan Leff, Nick Trevethan, Jim Regan, Polly Yam;
writing by Douwe Miedema; editing by Sue Thomas and Andy Bruce)