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Rusal seeks to raise $2.6 billion in Hong Kong IPO

Rusal seeks to raise $2.6 billion in Hong Kong IPO

Russian aluminum giant UC Rusal will try to raise as much as $2.6 billion by selling shares in Hong Kong in late January to reduce its mountain of debt, the company said Thursday.
Among the chief customers for the offering will be the foreign banks which have already loaned Rusal money, and Russian state-connected companies such as bank VEB, which earlier loaned Rusal money in order to keep the company in Russian hands.
But the company's prospectus for the minority stake also named high-profile investment funds as participants in the deal.
The offering 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.
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."
Rusal also has attracted as cornerstone investors Paulson & Co., run by billionaire John Paulson, NR Investments of Nathaniel Rothschild, Asian tycoon Robert Kuok and two prominent hedge funds, according to the prospectus. Paulson and Rothschild have pledged to buy nearly 0.5 percent of Rusal each. Paulson's spokesman couldn't immediately be reached.
Major international banks such as Barclays, BNP Paribas, Deutsche Bank and Royal Bank of Scotland, which have spent nearly a year in Rusal debt talks, also look like buyers with vested interests, since it would help reduce fears of a Rusal default that could harm their balance sheets.
BNP Paribas and Credit Suisse will act as the IPO's joint sponsors and global coordinators. BofA-Merrill, BOCI, Nomura, Renassiance Capital, Sberbank and VTB Capital are the bookrunners, while Rothschild has been chosen as the financial adviser of the offering.
Rusal ran up heavy debts during the credit boom that preceded the world financial crisis. Now it's struggling to pay.
It reached a restructuring deal with creditors in early December to repay its $16.8 billion borrowing within seven years. In a separate agreement, billionaire Mikhail Prokhorov acquired 6 percent in Rusal in exchange for taking on $1.7 billion of the company's debt, reducing Rusal's liabilities to $15 billion.
State-owned bank VEB, which gave Rusal a $4.5 billion emergency loan early this year, says it will buy 3 percent out of the 10 percent on offer. State-controlled Sberbank and VTB are buying roughly 1 percent each.
The banks are likely to follow the same agenda as VEB, which declared while handing out the loan that it wanted to ensure that this key company remains in Russian hands.
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.
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Vasilyeva is based in Moscow and Marquez in Hong Kong.


Updated : 2021-05-15 18:49 GMT+08:00