UC RUSAL agrees $16.8 bln debt deal ahead of IPO

* Agreement covers $7.4 bln debt with foreign lenders * Investor ONEXIM to convert $1.8 bln debt into 6 pct stake * Move paves the way for $2 bln IPO By Aleksandras Budrys MOSCOW, Dec 3 (Reuters) - Russia's UC RUSAL, the world's biggest aluminium producer, signed an agreement to restructure its $16.8 billion debt pile, paving the way for it to launch a $2 billion stock market flotation. UC RUSAL, controlled by tycoon Oleg Deripaska, said on Thursday international creditors holding around $7.4 billion of the debt had agreed to a four-year "pay if you can" period, during which the group would repay borrowings based on the performance of the business. The statement, which confirms what bank sources told Reuters on Wednesday, clears the way for UC RUSAL to make a planned IPO in Hong Kong and Paris, subject to approval by the relevant authorities. The company added it would seek to repay a total of $5 billion of debt to all lenders by the fourth quarter of 2013. Meanwhile Russian shareholder ONEXIM Group -- owned by Russia's richest man Mikhail Prokhorov -- will convert part of its $2.7 billion debt into a 6 percent additional shareholding in UC RUSAL. That will bring his stake to 19.16 percent -- making him the second biggest shareholder behind Deripaska. Prokhorov initially became a creditor to RUSAL when selling it a 25 percent stake in nickel miner Norilsk Nickel in 2008. "The signing of RUSAL's debt restructuring deal closes the chapter on a project of unprecedented size and complexity ... RUSAL is (now) ready to focus on implementing its strategic objectives," Deripaska said in the statement. A total of more than 70 lenders took part in the restructuring of some 50 credit agreements. Interest will be paid partly in cash, at a lending rate of LIBOR plus a range of 1.75 to 3 percent. (Writing by John Bowker; Editing by Hans Peters and David Holmes)