Rusal, an aluminum maker, strikes restructuring deal with creditors

By Andrew E. Kramer

Moscow – Rusal, the largest aluminum producer in the world, which is struggling under $16.7 billion in debt, has agreed with about 70 banks to restructure its loans and begin repayments when earnings improve, the company said Thursday.

The deal, apparently on lenient terms for Rusal and its owner, the Russian oligarch Oleg V. Deripaska, also clears the way for Rusal to take the next step back from the brink of bankruptcy: selling 10 percent of the company in an initial public offering this month.

“The signing of Rusal’s debt restructuring deal closes the chapter on a project of unprecedented size and complexity,” Mr. Deripaska said in a statement released by Rusal. He will retain about 53 percent of the company’s shares after the restructuring but before the public offering.

The deal, while troubling for its scale and potential losses for banks, is thought to set a precedent within Russia for other companies deeply in debt to Western creditors.

It suggests that banks for now are more inclined to roll over bad debt owed by often opaque Russian companies rather than rely on Russian courts to sort out claims in bankruptcy court. The move pushes into the future the need to sort out good loans from bad in the mountain of debt.

Russian debtors, along with those in the Middle East, are a focus of concern globally. Of about $200 billion in corporate debt that is coming due next year, about half is held by companies in Russia and the United Arab Emirates, according to Gary N. Kleiman of Kleiman International, a consulting firm that specializes in emerging banking and securities markets.

The foreign banks that hold about $7.4 billion of Rusal’s debt will allow the company to operate under a pay-as-you-can agreement, according to the statement Thursday.

In the first four years, interest will be paid partly in cash at rates slightly above the benchmark London interbank offered rate. The payments will depend on the performance of the business, which in turn depends on global aluminum prices. During this time, missed payments will be permitted to be rolled into the capital, the statement said.

The banks will then be asked to refinance the loans for an additional three years. Rusal also restructured $2.1 billion in debt to three Russian state banks – VTB, Gazprombank and Sberbank – on similar terms, the statement said.

The New York Times