Rusal, Creditor Agree to Convert Debt to Shares

MOSCOW -- Aluminum giant UC Rusal struck a debt-for-stock deal with a major creditor, helping reduce a $14 billion mountain of debt that has been threatening to loosen lead shareholder Oleg Deripaska's control of the firm. Rusal said it will convert $2 billion it owed Onexim, an investment vehicle controlled by oligarch Mikhail Prokhorov, into a 4.5% stake in Rusal. That will take Onexim's stake in the closely held company to 18.5%. The transaction gives all of Rusal an indicated value of $44 billion. Rusal said Onexim agreed for now not to exercise an option to sell its existing 14% stake to Mr. Deripaska, which would have pushed the debt-laden oligarch even further into the red. A further $800 million debt to Onexim will be restructured as part of a broader deal between Rusal and its creditors, the aluminum company said. Foreign creditors recently agreed to waive interest payments for at least two months while a broader restructuring is worked out. Foreign banks hold about $7.4 billion of Rusal's debt, with the rest in the hands of Russian state banks. Mr. Deripaska, once estimated to be Russia's richest man and with much of his money tied up in metals companies, was heavily hit as the global recession dragged down commodity prices.