Russian aluminum giant UC Rusal will try to raise as much as $2.6 billion by selling shares listed in Hong Kong in late January to reduce its mountain of debt, the company said Friday.
But the initial public offering will come with a host of restrictions on who can buy the shares and how they're traded, reflecting the concerns of regulators about Rusal's $14.9 billion debt load.
The Hong Kong Stock Exchange warned potential buyers in Rusal's IPO prospectus published Thursday that investment in the shares "involves significant risk" and that "investors may lose part or all of the value of their investment."
Moscow-based Rusal _ run by tycoon Oleg Deripaska _ is seeking to sell more than 1.6 billion shares at a price between 12.50 Hong Kong dollars ($1.61) and HK$9.10, according to the filing with Hong Kong's stock exchange, with the potential proceeds ranging from $1.9 billion to $2.6 billion.
The company said it plans to use all proceeds to "reduce outstanding debt and to satisfy other obligations to its creditors."
The IPO has attracted controversy, with critics accusing regulators of undermining Hong Kong's credibility as an international financial center by allowing a company so heavily in debt to list. The city's stock exchange initially declined to approve the listing before reversing course.
Regulators seemed to strike a middle ground by limiting the IPO's buyers to "professional investors" or those willing to purchase at least HK$1 million ($129,000) in shares. To start, shares will only be traded in blocks worth nearly $26,000.
The Hong Kong Stock Exchange said in the filing that Rusal does not meet the profit test to qualify for listing, but was allowed to float "on the basis of a large market capitalization, revenue of more than HK$500 million and positive cash flows" from its operations.
Earlier this year, Rusal announced a landmark deal to restructure its debt as it sought to go public in Hong Kong by the end of the year.
Under the terms of Rusal's restructuring deal, the company is not permitted to pay dividends unless its ratio of total net debt to earnings before interest, taxes, depreciation and amortization is 3 to 1 or less. As of June 30, the ratio stood at 47 to 1.
The company said in the filing that it does not expect "to be in a position to declare dividends" any time before 2013. Rusal recorded a $15.7 billion profit in 2008 and $3.8 billion for the six months ended June 30, according to the filing.
Deripaska, once Russia's richest man, is estimated by Forbes magazine to have lost some $24 billion of his fortune during the financial crisis.
Rusal's pricing will take place on Jan. 22 and it will be listed on Jan. 27.
Associated Press writer Nataliya Vasilyeva in Moscow contributed to this report.