Rusal Agrees to Two-Month Freeze on Debt Payments

March 6 (Bloomberg) -- United Co. Rusal, the aluminum producer controlled by Russian billionaire Oleg Deripaska, agreed to stop debt repayments for two months as it tries to renegotiate $7.4 billion of borrowings from foreign banks. The company has the option to extend the so-called standstill accord by an extra month, Moscow-based Rusal said in a statement today. Rusal amassed $14 billion of debt as it expanded smelters in Siberia, acquired a mine and a smelter in Africa, and agreed to help finance nuclear and hydropower plants in Russia. Aluminum dropped 60 percent in London since trading at a record $3,380 a metric ton in July after demand slumped amid a global recession. “Any easing of debt payments will give Rusal a second wind,” said Alexander Pukhaev, an analyst with VTB Capital in Moscow. “Unless bankers want to manage aluminum-making, restructuring debt is the only way.” Credit Suisse Group, BNP Paribas SA, Merrill Lynch & Co., ABN Amro Holding NV, Citigroup Inc., Natixis, Commerzbank AG, ING Groep NV and Calyon are among Rusal’s creditors, according to data compiled by Bloomberg. Russian banks and the majority of foreign lenders support the standstill, Rusal said. During the payment freeze, Rusal will reorganize debts “to the benefit of all stakeholders,” it said. The company owes $2.8 billion to Mikhail Prokhorov, whose Onexim Group sold the aluminum producer a 25 percent stake in OAO GMK Norilsk Nickel last year. Rusal may convert some of that debt into shares, Rusal Chairman Viktor Vekselberg said in January. Output Cuts Rusal plans to save $1.3 billion this year by cutting production and 5 percent of its workforce. The closely held company will reduce annual aluminum output by 500,000 tons by April 1, it said last month. Net income may fall to $476 million this year, from an estimated $3.9 billion in 2008, ING analysts said in a January report. Sales may drop to $11.8 billion, from $15.3 billion in 2008, ING said. OAO RusHydro, Russia’s state-run hydropower producer, and Rusal have started construction of a $6 billion hydropower dam and smelter complex near Boguchansk, Siberia. Rusal also has a project to build a smelter and nuclear plant with Rosatom Corp.