INTERVIEW-RUSAL eyes 7-8 year foreign debt extension

MOSCOW, May 14 (Reuters) - Aluminium giant UC RUSAL expects to secure an extra seven to eight years to repay its $7.3 billion debt to international banks and will not surrender a stake in the company as payment, a senior company director said. UC RUSAL, controlled by indebted billionaire Oleg Deripaska, also hopes this month to reach agreement with Russian state bank VEB on extending repayment of the $4.5 billion loan on which its stake in nickel miner Norilsk Nickel depends. "We believe Russian banks will also support the global conditions of the restructuring. There may be slight differences in the details, which are also being discussed," said Oleg Mukhamedshin, UC RUSAL's director for capital markets. Russia's once-mighty billionaires, their wealth shredded by the global economic slowdown, face an enormous challenge to repay the $130 billion in corporate debt due from their companies this year. UC RUSAL has been further hit after aluminium prices more than halved. In an interview with Reuters, Mukhamedshin said the more than 70 international banks owed money by the world's largest aluminium producer were poised to agree to a grace period during which United Company RUSAL would be exempt from repayments. "We are negotiating the final conditions, but it is already clear that the credits will be extended by seven to eight years, with a certain grace period," Mukhamedshin said late on Wednesday. "The length of the grace period is being negotiated. It is expected to be at least two years." UC RUSAL's total debt, including that owed to Russian banks, was $16.8 billion, he said. POSSIBLE IPO UC RUSAL supplies 12 percent of the world's aluminium , the price of which has fallen to just over $1,500 a tonne from an all-time high of $3,380 a tonne last July. In March, UC RUSAL agreed a two-month freeze on repayments to international banks that has since been extended by a further month to June 11. Talks will continue at the start of next week. "June 11 is not the end of the world," Mukhamedshin said. "It was clear from the very beginning that such a huge and complicated restructuring would need time." He said UC RUSAL expected to agree the basic principles of debt repayment with foreign banks by the deadline, although the subsequent approval process might require a further extension. Over the next three to four years, UC RUSAL would take steps to reduce its debt, Mukhamedshin said. These might include an initial public share offering -- a plan that the company first promised within three years of its formation in March 2007. "If some creditors want to participate in the IPO process, they will be able to buy shares, but we are not discussing converting debt into equity or other securities," Mukhamedshin said. Within four years, he said, UC RUSAL would have a debt level that it would consider "normal": a ratio of net debt to earnings before interest, tax, depreciation and amortisation (EBITDA) of 3 or less. RUSSIAN BANKS UC RUSAL has unveiled plans to save $1.1 billion this year as it cuts aluminium output by 11 percent. In the first quarter alone, it made a saving of $554 million. [ID:nLL637986] Mukhamedshin said UC RUSAL hoped soon to reach an agreement to extend its debt repayment to Russian banks. VEB is its single biggest Russian lender and the fate of UC RUSAL's one-quarter stake in Norilsk, placed collateral, rests on this debt. "We believe that, before the end of May, we will have a general decision on the restructuring of our debt to VEB. We have already sent some parameters of this restructuring scheme to VEB," he said. "The state does not participate in the negotiation process, but it monitors developments and we inform its representatives about results achieved." Mukhamedshin also said he was confident about resolving a dispute with Russia's Alfa Bank, which did not sign up to the standstill agreement and demands repayment of UC RUSAL's debt. "We don't believe one bank may hamper global restructuring of the whole credit portfolio. We will find a solution on Alfa Bank," he said.