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Rusal restructures US$10bn debt pile

Published:Wednesday | August 27, 2014 | 12:00 AM

By Jack Farchy in Moscow

Rusal has completed the restructuring of its US$10bn debt pile after negotiations with creditors that lasted a year, in a deal that will remove the financial uncertainty hanging over the world's largest aluminium producer.

Rusal, controlled by Oleg Deripaska, had been negotiating with creditors since last year to change the terms of its debts, with its profitability weighed down by years of low aluminium prices.

While its Russian lenders early this year approved a restructuring to waive mandatory repayments on its debt until 2016, it struggled to achieve unanimous support for changes in the terms of about US$5.2bn in credit lines from international banks.

However, earlier this month the final holdout lender, Royal Bank of Scotland, approved the deal after the company had prepared to go to court to attempt to force it through. Rusal said the deal would "strongly improve the company's debt profile".

The aluminium producer underwent a huge restructuring in 2009, but has remained highly leveraged, with US$10.3bn in net debt at the end of March compared to an equity market capitalisation of US$7.9bn.

However, Rusal's financial situation has improved markedly since it started talks with lenders about a year ago.

On the back of export restrictions from Indonesia on unprocessed ores, the price of nickel has risen by a third this year, boosting the profitability of Norilsk Nickel, in which Rusal owns a 28 per cent stake. The export ban has also helped lift aluminium prices to their highest in more than a year.

Rusal's Hong Kong-listed shares have risen 76 per cent since mid-March. The company is due to report first-half results this week.

(c) 2014 The Financial Times Limited.