RussNeft holds Talks with Glencore on Debt-for-Shares Deal

Russneft is in talks with the Swiss commodities trader, he said in an interview, without specifying the amount of stock to be transferred. Gutseriev founded the oil company 12 years ago.
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 $2.9 billion debt before a planned merger with Gutseriev’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, Gutseriev said. The merged entity, which he values at about $18 billion, would have reserves of 700 million metric tons of oil and produce 17 million tons a year, according to the billionaire, who seeks an initial public offering for the business in 2016.
Gutseriev founded Russneft in 2002. Five years later, he fled Russia for London amid a tax investigation. During his 3
1/2 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 tons a year, according to Gutseriev.
“Now those assets are worth $4.5 billion,” he said on Feb. 24. The tax charges against Gutseriev were dropped in 2010 and he returned to Russia.

Russneft Ownership

Russneft has undergone several ownership changes since its founding, with Gutseriev selling the company to fellow billionaire Oleg Deripaska shortly before leaving for London, then buying it back on his return and selling 49 percent to AFK Sistema, owned by his friend Vladimir Evtushenkov.
Gutseriev 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 Gutseriev bought out Sistema in 2013, having agreed with creditors Glencore and OAO Sberbank to cut rates on Russneft debt. Glencore now holds 40 percent to
49 percent in some Russneft units.
The Sistema deal fell apart because the Bashneft owner wasn’t as interested in expansion, Gutseriev said. “While Russneft was paying down its gigantic debt, I couldn’t raise financing. I had to register all new oil assets under Neftisa’s name,” he said.
Sberbank, Russia’s biggest lender, has a four-year call option on 10 percent of Neftisa, Gutseriev said. Russneft and Neftisa together have $4.9 billion of debt, which would drop to $1.6 billion following a deal with Glencore, he said.