Glencore to Swap Debt for 49% of Russneft, Says Oil Company Chairman - TheStreet

NEW YORK (The Deal) -- Commodities and mining group Glencore is poised to take a 49% stake in OAO Russneft as part of a potential debt-for-equity swap that could wipe out as much as $900 million of loans at one of Russia's biggest oil producers.

Switzerland-based Glencore has already agreed on the basis of a deal that is awaiting approval from Russian competition regulators, Russneft's owner and chairman Mikhail Gutseriev told Russia's Rossiya 24 TV channel on Wednesday, March 11.

The deal would expand a relationship that began in 2002 when Glencore provided Gutseriev with loans to found Russneft in return for the rights to trade the company's oil output.

"The deal is being signed, we have been finishing the shareholders' agreement," said Gutseriev in the television interview. "Glencore will own 49% in Russneft."

Russneft and its subsidiaries produced 18 million tons of oil, equivalent to about 360,000 barrels per day, and refined 8 million tons, according to its 2014 figures.

The sale is part of a wider restructuring of Russneft that will roll the group's subsidiaries into the parent company, the chairman said. Glencore owns stakes in some of those subsidiaries.

Gutseriev effectively captured 100% of Russneft in 2013 when Sistema JFSC, a Russian conglomerate controlled by billionaire Vladimir Yevtushenkov, sold its 49% stake to Gutseriyev's nephew Mikhail Shishkhanov and a business partner Felix Dlin for $1.2 billion.

Glencore spokespeople could not immediately be reached to comment on the deal. The possibility of a debt-for-equity swap first surfaced a year ago, when the notes to Glencore's annual results mentioned plans to convert at least $900 million of outstanding loans to Russneft into equity.

A deal would expose Glencore more directly to the ongoing tensions between Russia and Western governments, which have implemented sanctions targeting Russia's oil sector in response to Russia's perceived involvement in the conflict in the Ukraine. Glencore already has significant interests in Russia's oil sector as a result of trading agreements with oil companies including Russneft and OAO Rosneft.

Shares in Glencore, which is listed on the London exchange, traded Wednesday at 281.55 pence ($4.22), down 5.85 pence, or just over 2% on their Tuesday close.

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