Rusal Plans to Pay Back Foreign Banks Within 10 Years

March 27 (Bloomberg) -- Oleg Deripaska’s United Co. Rusal, Russia’s biggest aluminum producer, plans to repay the $7.4 billion it owes foreign banks within five to 10 years, linking payments to the metal’s price in London. Rusal is also seeking to defer payments of the original loan by two years. That would give the Moscow-based company time to cut output costs and minimize the debt load “at a time of low metal prices,” Rusal said in an analyst presentation March 25, a copy of which was obtained by Bloomberg News and confirmed by company spokeswoman Vera Kurochkina. “These are preliminary terms which are in the process of discussion,” she said in an e-mailed response today to questions on the presentation. Rusal agreed on a two- to three-month freeze in payments, starting March 11, with foreign lenders including ABN Amro Holding NV, BNP Paribas SA and Merrill Lynch & Co. The company cut total debt to $14.8 billion this week after Rusal investor Mikhail Prokhorov agreed to swap $2 billion owed him by the aluminum maker for new shares in the company. Rusal is cutting staff and closing 500,000 metric tons of production, or about 11 percent of total capacity, to reduce costs, which it expects to fall to $1,040 a ton by July, according to the presentation. Average output costs were almost $1,900 a ton in October. Price Recovery Aluminum for three-month delivery on the London Metal Exchange has averaged about $1,400 a ton this year, down from $2,622 a ton in 2008. Prices will rebound next year as economic stimulus measures and output cuts take effect, Artem Volynets, Rusal’s director of corporate strategy, said March 20. Rusal produced 4.4 million tons of aluminum last year and plans to make 3.9 million tons this year, according to the presentation. Rusal made 4.2 million tons of the lightweight metal in 2007. Prokhorov has raised his stake in Rusal to 18.5 percent from 14 percent, while the remaining $800 million owed him by the company will be restructured along with its loans to international banks. State-run bailout lender Vnesheconombank is the single-biggest creditor after loaning Rusal $4.5 billion in October for one year.