Pressure on Rusal as debt deadline looms

Oleg Deripaska’s UC Rusal was scrambling to gather support from foreign creditors on Monday night for a standstill on principal payments on $7bn in debt before a payment deadline. Time was running out for the aluminium group to win enough support from foreign creditors in time to delay the first payment due this month on the loans on Tuesday. People close to the situation said it was not clear whether Rusal would make the payment regardless of whether the standstill agreement was agreed or not. Another person close to the situation said tension was building ahead of the deadline. “It is not clear what is going to happen tomorrow [Tuesday]. It is going to be a very exciting day.” UC Rusal declined to comment. But people close to Rusal’s 70 foreign creditor banks, which are led by eight lenders including BNP Paribas, Natixis and Société Générale, said it was unlikely the foreign banks would call a default on payments in the midst of negotiations. “No one is going to pull the plug overnight,” said one banker close to the situation. “That would not be wise.” Foreign bankers are locked in a high stakes poker game over payments of up to $130bn in foreign corporate debt owed by Russian companies this year. Mr Deripaska’s UC Rusal is at the centre of attention because with total debts of $17bn it looks to be Russia’s most indebted company and the outcome of talks with creditors will likely set a precedent for other Russian companies, too. The standstill agreement would be for at least two months while a broader restructuring deal is hammered out that would stretch out payments over several years. People familiar with the matter say foreign creditors are anxious to gauge the level of state support for a broader restructuring of UC Rusal’s $17bn in debts before they agree to restructure the foreign debts. “The standstill is only the first stage,” said the banker close to the situation. But Russian officials have been increasingly vocal in recent weeks about cutting back bail-out funds for oligarchs amid increasing concern about Russia’s dwindling reserves. A $50bn programme to refinance companies’ foreign debt has been suspended, while Igor Sechin, Russia’s powerful first deputy prime minister, has said the $4.5bn in bail-out funds Rusal received last year from that programme to prevent its 25 per cent stake in Norilsk Nickel from being seized by western creditors was an “unprecedented amount”. Arkady Dvorkovich, economic adviser to Dmitry Medvedev, the president, told investors in Krasnoyarsk, Siberia late last week that the government wanted to see big business take greater responsibility for itself. Copyright The Financial Times Limited 2009