Oligarch's aluminium firm close to renegotiating debt and announcing Hong Kong flotation
Rusal, the world's largest aluminium company, is poised to secure a $17bn (£10.2bn) debt restructuring that it hopes will pave the way for a $3bn flotation in Hong Kong to be announced possibly next week.
The development will be a huge relief to the man who controls Rusal – Oleg Deripaska, the Russian oligarch described as being closest to his country's prime minister Vladimir Putin.
In what has been a hugely protracted and complicated refinancing of $16.8bn of debt involving 72 international banks, lenders have agreed to extend the length of repayments on money owed by the company.
A successful debt rescheduling for Rusal is regarded as crucial in the rehabilitation of the wider Russian economy, which has suffered in the aftermath of the collapse in global commodity prices. It also makes a flotation of Rusal more likely.
The listing of 10% of Rusal's equity, valuing the firm at $30bn, hinges on permission given by the Hong Kong listing committee, which meets on Monday. If permission is granted, it will be a major boost for the influential Deripaska, who is married to one of Boris Yeltsin's daughters and was once feted as Russia's richest businessman.
Marketing of Rusal shares to potential Chinese investors has been intense in recent weeks. The company hopes that because VEB, the Russian state-owned bank that has Putin as chairman of its supervisory board, will take a "cornerstone" stake, this will reassure potential investors that Rusal has the unequivocal backing of the Kremlin.
Deripaska has endured a difficult year: his fortune shrivelled from a reputed $28bn in 2008 to $3.5bn, according to some analysts, as result of the financial crisis. He has always claimed stories of his wealth were exaggerated.
Deripaska still has problems. He must face a legal challenge in the UK high court from Michael Cherney, a fellow oligarch and former business associate, who claims he was the beneficial owner of 20% of Rusal's stock that, he alleges, Deripaska held in trust for him. Deripaska is strongly contesting the claim. Rusal insiders suggest that the facts pertaining to any potential litigation will be spelled out in any offer documents to investors.
Rusal was formed in 2006 from the three-way merger of two Russian rival producers, Sual and Rusal, and the aluminium operations of Swiss commodities firm Glencore. One condition of the deal was that the combined company would list by the end of this year.
The Rusal float was originally meant to have taken place in London, where it would have joined a number of Russian mining firms. But Rusal insiders said the adverse market conditions in late 2007 precluded a UK float. Rusal will now seek a dual listing in Paris when it floats in Hong Kong – because, some advisers have suggested, a major bank underwriting the float, BNP Paribas, is French.
The 41-year-old Deripaska graduated in physics and economics, became general manager of a smelter business and is one of the undisputed winners of the notorious "aluminium wars" that raged in post-communist Russia.
A close friend of British financier Nat Rothschild, he was dragged into an embarrassing political row last year after it was alleged that the shadow chancellor, George Osborne, had solicited him for funds for his party even though any donation would have been problematic because Deripaska is not a British national.
Osborne denied ever asking for, or being offered, money, but apologised at the time for how his actions might have appeared. The affair is said to have taken place while Rothschild, Deripaska and Osborne were socialising in Corfu.
Of the $16.8bn of Rusal debt refinanced, $7.4bn is held by international banks. Banks with cash loaned to Rusal are said to be keen to see the company float this year so they do not have to write down debts in their end-of-year accounts.
Copyright Speakers Corner 2016