Rusal IPO Delayed

It took dealing with more than 70 lenders, but Rusal has managed to restructure its giant debt load.

While such a move was seen as a key step towards listing on the Hong Kong Stock Exchange, the Chinese bourse rebuked the aluminum giant yet again.

“The signing of Rusal’s debt-restructuring deal closes the chapter on a project of unprecedented size and complexity,” Rusal’s chief executive Oleg Deripaska said in a statement.

But despite dealing with the complexities of repaying US$16.8 billion of debt spread over 50 credit agreements, Rusal will have to wait for the funds it hoped to raise by floating shares in Hong Kong.

It was expected to raise roughly US$2 billion by selling a 10% stake on stock markets in Hong Kong, but the bourse — which had already postponed a decision on the Rusal listing twice — announced on Dec. 7 that the company still hadn’t met certain conditions.

The initial public offering (IPO) in Hong Kong is now expected to take place some time in early 2010 — this despite the Russian state supporting the bid by offering to buy roughly a third of the IPO.

While the bourse wouldn’t say what conditions Rusal had yet to meet, it did say the conditions would not be easy to solve in a few days.

Like some other European corporations, Rusal is turning to the Hong Kong exchange in hopes of tapping a market that is still hot in comparison with European markets, where performance has been uninspiring.

Fortunately for Rusal, aluminum prices have been recovering — a fact that it says gives it the luxury of not having to rush a public listing. After dropping just below US60¢ per lb. earlier this year, the metal has since rebounded and was selling for roughly US95¢ per lb. at presstime.

Rusal first announced the completion of a debt restructuring at the end of July. The announcement, however, proved to be premature, as according to Russian newspaper Vedomosti, the London- based hedge fund Blue Crest was not satisfied with the terms. Rusal is said to owe Blue Crest US$100 million.

Of the US$16.8 billion in debt, US$7.4 billion is to international lenders.

The restructuring will see Rusal pay foreign lenders in two phases.

In the first phase, it will pay interest of Libor plus 1.75-3.5% over four years, with payments on principal made on a pay-as-you-can basis.

After the four years, another refinancing will be done for a second phase that will span over three years. Rusal says it is aiming to pay back US$5 billion of debt by the end of 2013.

Part of the restructuring is said to include a deal with Russian billionaire Mikhail Prokhorov’s Onexim group — a private investment fund — that will see Prokhorov exchange US$1.82 billion of the US$2.7 billion owed to him for another 6% stake in Rusal. That will bring his stake to 20%, making Prokhorov the second largest stakeholder in the company behind Deripaska, who holds a 51% stake.

Only a short time ago, Deripaska was considered Russia’s richest man, but the economic crisis, and the toll it took on commodity prices, severely cut into his fortunes.

Rusal is the world’s biggest aluminum producer.