Stakes mount in run-up to UC Rusal listing

The stakes are mounting in Oleg Deripaska’s bid to list his UC aluminium group in Hong Kong and Paris by the end of the year as the clock ticks closer to a November 19 deadline. The Russian billionaire is in the final stages of agreeing a restructuring deal with foreign creditors on $7.3bn in debts, a vital precondition for the initial public offering valued at between $1bn and $2.5bn to go ahead, people familiar with the situation say. But even if the tycoon reaches agreement in time for a key November 19 hearing at the Hong Kong Stock Exchange, he must still race to win creditor committee approval from the more than 70 banks by the end of November and then market the sale to investors in the two weeks left before most leave for Christmas in mid-December. “It is extremely tight. We have to realise that the chances are not that big that this will be successful,” said one person familiar with the matter. “There are going to be a lot of sweaty-palmed situations between now and then,” said another person close to the situation. “There is no guarantee the Hong Kong Stock Exchange can get through all the material in time.” The last-minute withdrawal of Goldman Sachs as a lead adviser on the IPO underlines the risks surrounding what would be one of the biggest offerings of the year. Goldman Sachs withdrew as a lead adviser just one week before the company filed its initial application to the Hong Kong Stock Exchange on October 2, because it said it needed more time to familiarise itself with the deal, people close to the situation said. Mr Deripaska, once Russia’s richest man, has been dogged by issues surrounding his past partnerships in the Russian aluminium industry in the 1990s, a time when it was racked by crime. He is being sued by one former partner, Michael Cherney, in London’s High Court for a stake in his UC Rusal; Mr Deripaska contends he owes nothing to Mr Cherney, who he claims was not a partner but ran a protection racket to extort money out of his company. Mr Cherney denies any ties to organised crime. But relationships like these have caused problems for Mr Deripaska, particularly in seeking entry visas to the US. Mr Deripaska has been barred from getting a full US visa; the state department has declined to explain why. But he has travelled to the US twice this year on special one-off entry permits, according to people close to the situation, and plans are being made for him to travel there a third time this year to market the IPO to investors in New York. Goldman Sachs is “a conservative firm ... and Rusal’s regulatory issues are at the challenging end of the spectrum for Russia,” said one person familiar with the situation. Another person familiar with the matter insisted Goldman Sachs maintained good relations with Rusal and said the company never had a formal mandate to work on the IPO. Other banks had fewer qualms about the pace of the IPO preparations and joined a bidding war to take its place: BNP Paribas, one of Rusal’s biggest creditor banks, took over as lead sponsor together with Credit Suisse, while Merrill Lynch/Bank of America joined the growing ranks of underwriters one tier down, which also include Bank of China, and Renaissance Capital, the Moscow investment bank. The Hong Kong Stock Exchange is asking “lots of questions” about the Cherney litigation, said one person familiar with the matter, who added: “But there are no red flags yet. There are lots of fears around making sure there is proper and adequate disclosure for the Cherney litigation, and around the debt restructuring. And it is the first time Hong Kong has seen a list of Russian risk factors.” The timing of the issue is also fraught. The company is pushing to get it done this year to catch the bull wave for commodities and emerging market assets that is being fuelled by the weak dollar. But amid fears that the bull market may start to unwind, the fear is it could worsen next year. The IPO is “clearly a child of the current bull market. There are no illusions about that. But if that unwinds, we are going to get valuations the shareholders do not like,” said one person close to the situation. Another driver of the rush to IPO by the end of the year may be an agreement that Mr Deripaska has with the other shareholders in Rusal [billionaires Viktor Vekselberg, Mikhail Prokhorov and Glencore] stipulates he must make “a serious attempt” to conduct an IPO of the company by the end of the year or start buying out their shares, according to one person familiar with the matter. “They have an agreement that it can be deferred if there has been a serious attempt at an IPO,” said the person. Rusal declined to comment, saying only it was “very close to completing the restructuring deal”. Copyright The Financial Times Limited 2009. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.