Rusal Nears Debt Deal Key to IPO
The debt deal, which bankers said is probably the largest and most complex of the restructurings undertaken by debt-swamped Russian companies, is likely to be announced as early as next week after approvals by creditor banks are completed, these people said.xml:namespace prefix = o />xml:namespace prefix = o />
Rusal CEO Oleg Deripaska, in September, would remain the firm's largest shareholder if its IPO goes forward.
«All the terms are agreed,» said one person close to the talks.
The long-delayed deal is aimed at allowing Rusal breathing space to repay $16 billion in debt built up when metal prices were at record highs before the financial crisis hit last year.
The IPO, which is still in the planning phases and could be delayed if market conditions aren't favorable, is aimed at raising cash to help repay creditors. Hong Kong regulators are expected to approve the company's listing at a regular meeting Nov. 19; Rusal has also applied for a secondary listing in Paris.
Asian investors are Rusal's main target, and the company and its bankers have been talking to major state-owned companies in China, as well as government-owned funds across the region, about taking major stakes, according to people familiar with the situation. Rusal plans to offer a 10% stake in the IPO, raising as much as $2.5 billion.
A Rusal spokesman declined to comment.
The debt deal, initially agreed to in July, extends over seven years, during the first four of which principal will be paid on a «pay if you can» basis. Interest rates will vary depending on how much debt the company is able to pay down. The plan targets a total of $5 billion in repayments by the end of 2013 and prohibits dividend payments until debt levels are reduced, according to previous Rusal statements.
Only one major creditor, tycoon Mikhail Prokhorov, will convert a substantial part of the $2.8 billion Rusal owes him into equity, ending up with a stake of as much as 19% in the company as a result of the deal, up from 14%. Western banks could get warrants for a small stake, people close to the deal said, while the Russian state bank that made a $4.5 billion bailout loan a year ago has agreed to extend that until late 2010. Mr. Prokhorov wasn't available for comment.
In the IPO, founder and Chief Executive Oleg Deripaska will see his 56.8% stake reduced to just below 50%, but will remain Rusal's largest shareholder, according to people close to the company. Other shareholders are Soviet-born billionaires Viktor Vekselberg and Len Blavatnik, as well as trading company Glencore International. Messrs. Deripaska, Vekselberg and Blavatnik, as well as Glencore, weren't available for comment.
Preparations for the IPO have led Rusal, one of Russia's most secretive companies, to disclose the details of its finances to investors for the first time. In a presentation to analysts last month, Mr. Deripaska and his colleagues laid out details of the company's profitability, according to people familiar with the meeting.
Materials from that session, viewed by The Wall Street Journal, show that Rusal said that before the crisis hit it enjoyed fatter profit margins than its main global competitors. Rusal had $1.4 billion in net profit on $8.4 billion in revenue in the first half of 2008. In the first half of 2009, when prices and demand plunged, revenue dropped to $3.8 billion, with a net loss of $784 million.
The company sharply cut costs this year, reducing the cash cost of producing a ton of aluminum by about 25%, according to the presentation.