Rusal Restructures $2.8 Billion Debt to Prokhorov

March 22 (Bloomberg) -- United Co. Rusal, Russia’s biggest aluminum producer, agreed to boost billionaire Mikhail Prokhorov’s stake as part of the restructuring of $2.8 billion in debt. Rusal and Prokhorov’s Onexim Group agreed that $2 billion of the debt will be converted into Rusal shares, boosting Onexim’s stake in the aluminum producer to 18.5 percent from 14 percent, the companies said in an e-mailed statement today. The remaining $800 million of will be restructured along with the $7.4 billion that Rusal owes Russian and international banks. Boosting Onexim’s stake 4.5 percentage points in exchange for $2 billion gives Rusal a “crazy” total price tag of about $44 billion, said Michael Kavanagh, head of equity research at UralSib Financial Corp. The valuation may set a precedent for the restructuring of Rusal’s debt to Russian and foreign banks. “If this sets a benchmark for Rusal’s valuation, then it’s not great for foreign banks,” Kavanagh said. “If you tried to sell the whole of Rusal now, you wouldn’t get $44 billion. You’d be lucky to get $10 billion.” Russia’s government may allow Moscow-based Rusal, considered a “strategic” company, to pay foreign creditors in equity shares, First Deputy Prime Minister Igor Shuvalov said March 18. Deripaska, whom Forbes magazine said lost 88 percent of his fortune last year, this month reached a two-month payment freeze on $7.4 billion that Rusal owes more than 70 banks, including ABN Amro NV, Citigroup Inc., BNP Paribas SA and Merrill Lynch & Co. Russian companies owe foreign banks $100 billion this year. Deripaska Stake “Essentially, someone from the government has come over to Onexim and said, ‘This is the way it’s going to be,’” Kavanagh said by telephone in Moscow. OAO GMK Norilsk Nickel, Russia’s biggest mining company, has a market value of 444 billion rubles ($13 billion) on the Micex Stock Exchange in Moscow, while Alcoa Inc., the largest U.S. aluminum producer, is valued at $6.2 billion. Billionaire Oleg Deripaska’s EN+ Group will see its stake in Rusal shrink to 53.8 percent from 56.76 percent after the Onexim restructuring, while the ownership of the former shareholders of OAO Sual Group will drop to 18 percent from 18.92 percent and Glencore International AG’s stake will fall to 9.7 percent from 10.32 percent, according to the statement and figures on Rusal’s Web site. Prokhorov sold 25 percent plus one share in Norilsk to Rusal last year in exchange for the 14 percent Rusal stake and a cash sum supported by a $4.5 billion loan arranged by the aluminum company. Rusal Chairman Viktor Vekselberg said in January that the aluminum company might convert some of the debt into shares. Onexim agreed not to exercise a put option on any Rusal shares during the two-month “standstill” agreement of Rusal and its creditors, according to today’s statement.