Rusal gets respite from debt

The company has negotiated a two-month principal deferral UC Rusal has kicked off its debt restructuring campaign. The company has agreed with its western lenders on a 2-month respite from principal payments. During this time Rusal hopes to restructure its $7.4 billion international debt. UC Rusal announced on Friday that it had signed an agreement with western banks for a two-month moratorium on its principal loan payments. The deferral could be extended for another month. During this period the company will be paying interest only, Rusal’s spokesman confirmed. Rusal needs the respite to negotiate a long-term debt restructuring. “This is the first stage of the large-scale restructuring program,” the source said, though without disclosing the figures. UC Rusal’s debt totals $14 billion, $7.4 billion of which is owed to international banks. The deal covers over 30 transactions and more than 70 banks, including syndicated and bilateral loan agreements, as well as guarantee agreements and letters of credit. For the arrangement to take effect, it needs support from 75 percent of Rusal’s foreign lenders. Russian lenders have already okayed the scheme. Before the crisis, Rusal had no problems with borrowing. In late 2007 the company secured a loan from a group of western banks, including ABN Amro, Barclays, BNP Paribas, Calyon, Citigroup, ING, Natixis, and SocGen, worth $2.35 billion – Rusal’s biggest international loan. It was taken out for a period of seven years, at LIBOR +0.8 percent, with a two-year grace period on the principal: until November 2009 Rusal pays interest only. The aluminum group began its debt restructuring negotiations back in December 2008. Oleg Deripaska revealed recently that Rusal was paying less than 4 percent in annual interest, and banks sought to raise the rate. “But this is a question of balance – what concessions they are ready to make and what is acceptable to us, and what compromise can be reached,” he explained. Deripaska hoped that once Rusal got the respite, the negotiation would take three to four months. Rusal also expects to extend the principal debt moratorium for another few years, and to peg the principal payments to global aluminum prices. Such schemes have already been tested by Oleg Deripaska’s other companies, said Yegor Fedorov, at the Bank of Moscow. The businessman recently received a deadline extension for a EUR 500 million loan used to buy his 25 percent stake in the Austrian builder Strabag. The loan, originally from Deutsche Bank, was secured with Deripaska’s Strabag stake and refinanced by other Strabag shareholders last year. Now, the deadline has been extended until April 1, 2009. Rusal also negotiated a deferral on its debt to Mikhail Prokhorov, running at about $2.8 billion. Today, banks are not keen on bankrupting borrowers, especially major ones like Rusal, and compromise deals are becoming more common with loans and Eurobonds alike, according to Fedorov. source：www.cbonds.info