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Glencore mulls IPO in first half next year: sources

LONDON (Reuters) - Privately held commodities group Glencore GLEN.UL is considering listing in the first half of next year, sources close to the situation said on Thursday, an IPO that could raise around 10 billion pounds ($16 billion).

Secretive Glencore, the world’s biggest commodity trader, has been preparing to go public after issuing a $2.2 billion convertible bond last year.

The group, which on Thursday posted a strong jump in nine-month profit, is considering an initial public offering (IPO) that would likely launch off the back of full-year results in March or April, according to two people familiar with the matter who declined to be named.

Switzerland-based Glencore declined to comment.

While no final decision has been made on the size of the offering, it could raise around 10 billion pounds, one source said, making it one of the biggest London flotations on record.

The IPO could to be a dual listing in London and Hong Kong, another source said. Morgan Stanley, Citigroup and Credit Suisse are expected to be involved in the listing.

In the credit markets, the cost of insuring Glencore’s debt against default fell, which analysts said was sparked by the news about possible timing of the IPO.

Five-year credit default swaps tightened 30 basis points to 215 basis points, the tightest levels since May.

“Whilst we wouldn’t expect the proceeds to be put toward debt reduction, we consider the increased transparency and additional funding source should provide comfort to credit investors,” analyst Matthew Robbins at RBS said in a note.

GOLD SPIN-OFF EYED

Another analyst said an IPO of Glencore would likely not take place until it completed a spin-off of its gold assets.

In August, Glencore unveiled plans for spinning off or listing its Kazzinc gold assets, which could be worth more than $5 billion, next year.

Earlier this year, speculation surfaced about a possible merger with miner Xstrata XTA.L, of which Glencore is the biggest shareholder, with a stake of nearly 35 percent.

Major Xstrata investors said they were wary of linking up with Glencore ahead of an IPO due to the difficulty of valuing the private group.

Last December’s convertible bond valued the company at about $35 billion, but strong profits since then will have led to an increase, analysts say.

Net profit in the first nine months rose 42 percent to $2.5 billion on a 40 percent rise in revenue to $105.9 billion.

Its industrial division, which includes mining operations, outperformed as average commodity prices surged 40-55 percent.

Glencore, whose debt burden worried investors during the downturn, said liquidity fell to $4.6 billion in the third quarter from $6.5 billion in the second quarter, but beat a target of $3 billion.

Net debt rose to $15.2 billion from $13.6 billion in the second quarter, according to a statement released to bondholders and made available to Reuters by a source who had access.

“Net debt rising ... is less welcome for debtholders, but credit metrics are relatively stable and liquidity is strong,” said Miriam Hehir, director of credit research at RBC Capital Markets.

Third-quarter net profit rose to $979 million from $677 million in the second quarter, the highest since the onset of the global downturn in 2008, Glencore said.

($1=.6296 Pound)

Additional reporting by Natalie Harrison; Editing by Will Waterman and David Hulmes

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