Russian govt to appoint to Norilsk board

MOSCOW, Nov 5 (Reuters) - Russia's government will have a greater say in managing Norilsk Nickel, the world's largest nickel miner, after bailing out one-quarter shareholder United Company RUSAL with a $4.5 billion state loan. Norilsk will elect a government representative to an enlarged board and appoint two state representatives to its management team as a condition of the loan, UC RUSAL said, in a move that could force compromise between warring shareholders. "There will be tighter control of management, which will result in better use of financial resources," UniCredit Aton equity analyst George Buzhenitsa said. "It's in the state's interest for this company to run efficiently." UC RUSAL, majority owned by billionaire Oleg Deripaska, is among the first beneficiaries of the Kremlin's $50 billion rescue package for Russian companies struggling to refinance Western loans during the acute global liquidity crunch. It received the one-year loan from state bank VEB, or Vnesheconombank, to enable it to repay a loan taken in April to help it purchase a 25 percent-plus-two-shares stake in Norilsk. The stake is being used as collateral against the state loan. "Everyone understood the government would save RUSAL and wouldn't allow such a huge block of shares to fall onto the market," Deutsche Bank metals analyst Olga Okuneva said. UC RUSAL and Vladimir Potanin, Norilsk's chairman and single largest shareholder, have publicly disagreed about the company's management, including the election of a new board that effectively strengthened Potanin's control of the miner. UC RUSAL, itself the world's largest aluminium producer, said in a statement the government representative would be elected to Norilsk's board at an extraordinary shareholders' meeting on Dec. 26. Norilsk did not comment. "This realignment will weaken (Potanin's) influence, encourage increased transparency in the company's decision-making process and provide improved oversight of Norilsk Nickel's operations," UC RUSAL said in the statement. It said the loan would have an interest rate of LIBOR plus 5 percent, with an option to extend after the initial year at the discretion of the bank's advisory council. SHARE BUYBACK VEB has been entrusted by the government to disburse $50 billion by the end of 2009 to help Russian companies refinance $120 billion in Western loans. The loans, however, are not being sacrificed for free. Some of Russia's richest men, including Deripaska, have transferred stakes in prized assets from Western banks to the Russian state as collateral, giving the Kremlin the means to grab the assets should the debtors fail to repay their loans. Analysts said it was too early to say whether the state would eventually take control of a stake in Norilsk. "It may not come to a real nationalisation. RUSAL will try to pay off its debt to retain the stake as its own," Okuneva said. Norilsk's Moscow-traded stock has plunged about 60 percent since peaking in May as the company battles falling nickel prices, the global crisis and investor flight from Russia. Another point of contention between Potanin and UC RUSAL has been the plan by Norilsk's management to spend nearly $2 billion buying back up to 4 percent of the company's stock at a massive premium to its market price. Norilsk, in a separate statement on Wednesday, said it had bought back about 26 billion roubles ($960.5 million) of its own stock prior to a Siberian court order last week freezing the planned share buy-back. The metals giant said in a statement on its Web site, www.nornik.ru, it had stopped further purchases after receiving the court injunction on Oct. 29. The fate of the purchased shares was not immediately clear and Norilsk declined comment. Norilsk offered on Aug. 22 to buy back up to 7.95 million shares at 6,167 roubles each. The company's stock was trading at 2,965 roubles at 1440 GMT, up 6.7 percent on the day. UC RUSAL said in a separate statement it intended to ask the securities market watchdog to start an investigation into the legitimacy of the share buyback.