Report: Russia’s Russneft in debt-for-share swap talks with Glencore

MOSCOW, Feb 27 (PRIME) -- Swiss commodities trader Glencore Xstrata Plc may forgive some debts of Russian oil company Russneft in exchange for shares in the oil producer it helped to finance, Russneft President Mikhail Gutseriyev told Bloomberg in an interview released on Thursday.

Russneft is in talks with the Swiss trader, Gutseriyev said, without specifying the amount of stock to be transferred.

Glencore, already one of Russneft’s largest creditors and a shareholder in some of its units, is strengthening a foothold in the oil industry to expand its access to crude and gas. For Moscow-based Russneft, a deal would reduce its U.S. $6.9 billion debt before a planned merger with Gutseriyev’s Neftisa oil company.

Charles Watenphul, a spokesman for Baar, Switzerland-based Glencore, declined to comment.

A tie-up between Russneft and Neftisa would make Glencore a shareholder in the combined group, Gutseriyev said. The merged entity, which he values at about $18 billion, would have reserves of 700 million metric tonnes of oil and produce 17 million tonnes a year, according to the billionaire, who seeks an initial public offering for the business in 2016.

Gutseriyev founded Russneft in 2002. Five years later, he fled Russia for London amid a tax investigation. During his three and a half years in the U.K., he spent $1.5 billion on oil assets in Kazakhstan, Azerbaijan and Russia. These acquisitions formed the basis of Neftisa in 2010, a company that now produces 7 million tonnes a year, according to Gutseriyev.

“Now those assets are worth $4.5 billion,” he said on Monday. The tax charges against Gutseriyev were dropped in 2010 and he returned to Russia.

Russneft Ownership

Russneft has undergone several ownership changes since its founding, with Gutseriyev selling the company to fellow billionaire Oleg Deripaska shortly before leaving for London, then buying it back on his return and selling 49% to AFK Sistema, owned by his friend Vladimir Yevtushenkov.

Gutseriyev had planned to merge Russneft with Sistema’s Bashneft unit and then offer Glencore a stake in the combined company. The deal fell through, and Gutseriyev bought out Sistema in 2013, having agreed with creditors Glencore and Sberbank to cut rates on $6.2 billion of Russneft debt. Glencore now holds 40–49% in some Russneft units.

Sberbank, Russia’s biggest lender, has a four-year call option on 10% of Neftisa, Gutseriyev said. The combined debt of Russneft and Neftisa would be $1.6 billion following a tie-up, he said.

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