Glencore International AG, the biggest commodity trader, sold as much as US$2.2 billion ($3.1 billion) of convertible bonds to investors including BlackRock Inc. in what may be the first step toward an initial public offering.

The bonds, which are due December 2014, are convertible into Glencore shares upon an IPO or “other pre-determined qualifying events,” the Baar, Switzerland-based trader said today in an e-mailed statement.

Other buyers of the bonds include Government of Singapore Investment Corp., Greenwich, Connecticut-based private equity investor First Reserve Corp., and Zijin Mining Group Co., China’s third-largest copper producer, Glencore said.

Glencore is owned by its employees, trades metals and oil and controls mines and smelters. Led by Chief Executive Officer Ivan Glasenberg, it owns 34% of Swiss miner Xstrata Plc and 9.7% of United Co. Rusal, the largest aluminum producer. Glencore’s net income slid 56% to US$1.8 billion in the first nine months of 2009 after commodities prices fell.

“This transaction, in which Glencore is opening up its equity capital to outside investors, marks an important milestone as we embark on the next stage of our corporate development,” Glencore said in the statement.

The offering was increased from between US$1.5 billion and US$2 billion because of “strong” demand, Glencore said.

“As economic growth resumes, the outlook for most commodity markets is continuing to improve,” it said.

Swaps Rise
Citigroup Inc. and Morgan Stanley advised Glencore on the offering.

Credit-default swaps on Glencore rose 1 basis point to 154, according to CMA DataVision prices at 10 a.m. in London. That’s down from an equivalent 3,325 basis points last December and means it costs 154,000 euros ($308,133) a year to insure 10 million euros of the company’s debt against default for five years.

Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements.