Russia May Let Deripaska Pay Foreign Banks With Rusal Shares

March 18 (Bloomberg) -- Russia’s government may allow billionaire Oleg Deripaska to pay foreign creditors of United Co. Rusal in shares of the country’s biggest aluminum producer, First Deputy Prime Minister Igor Shuvalov said. “That’s an issue between Rusal and its creditors,” Shuvalov said in an interview in his office at the government’s headquarters in Moscow today. “The government’s position on Russian debt to foreign banks has been that all debt must be paid back and all agreements upheld.” Deripaska, who Forbes magazine said lost 88 percent of his fortune last year, reached a two-month moratorium on $7.4 billion that Rusal owes to more than 70 banks, including ABN Amro NV, Citigroup Inc., BNP Paribas SA and Merrill Lynch & Co., on March 6. “The current process says foreign shareholders will need to apply for approval from the government, and we will consider such requests immediately,” said Shuvalov, who runs the government in Prime Minister Vladimir Putin’s absence. Rusal is on a list of more than 300 “strategic” companies that the government considers vital to the economy. Deripaska’s Basic Element holding company said yesterday that it may have to sell stakes in some companies to repay $650 million owed to Alfa Bank, the Moscow-based lender controlled by billionaire partners Mikhail Fridman and Pyotr Aven. Alfa Bank was the only major Rusal creditor who refused to sign the so- called standstill agreement. “We are not in a position of mass sales, but we’re ready for mutually acceptable solutions,” Basic Element finance chief Andrey Yashchenko said in an interview yesterday. He declined to say in which companies Basic Element may sell stakes. Fridman, Medvedev A court in Jersey in the Channel Islands last month froze 13.7 million pounds ($19 million) of assets belonging to Basic Element unit EN+ after a lawsuit filed by an affiliate of Alfa Bank, which said Deripaska owes it a total of $1 billion. Deripaska, 41, and Fridman, 44, issued a joint statement on their debt dispute late yesterday, after Fridman was summoned to the Kremlin to discuss social issues such as unemployment with President Dmitry Medvedev, according to state television. Fridman said in the statement that the two businessmen were seeking a “mutually acceptable” solution, while Deripaska said the “unprecedented world financial crisis” may be considered a force majeure allowing “for the change in the terms of previously reached agreements.” ‘Not Our Intention’ Shuvalov said he’s held “unofficial” talks with Rusal’s creditors to make clear that the government isn’t considering bailing out the company. “Possibly those creditors were counting to hear from us that we were ready to buy a stake or restructure the debt and I told them they shouldn’t expect such statements from us as this is not our intention,” Shuvalov said. “We are not planning to do that.” Deripaska tumbled to 164th in Forbes magazine’s ranking of the world’s richest people this month with a fortune of $3.5 billion. He was ranked ninth last year. In October, he surrendered to foreign banks his stakes in Canadian auto parts maker Magna International Inc. and German builder Hochtief AG. Rusal held on to its stake in OAO GMK Norilsk Nickel, Russia’s biggest mining company, after a $4.5 billion loan from state bailout bank VEB, or Vnesheconombank. Shuvalov said closely held Rusal shouldn’t count on any more financial aid from the government, adding that bailing out a private company would be an “extraordinary measure.” “When we’re asked if we’re ready to help Rusal by becoming a shareholder, we are as of today not prepared to do so,” Shuvalov said. “There is an anti-crisis provision allowing us in extreme cases to buy shares to provide stability and help cover debt,” he said. “But we are not considering such an option with Rusal.” Rusal spokeswoman Vera Kurochkina declined to comment immediately today on the company’s talks with foreign banks. To contact the reporter on this story: Denis Maternovsky in Moscow at dmaternovsky@bloomberg.net