Rusal IPO Said Approved by Hong Kong Bourse, Watchdog (Update3)

Dec. 21 (Bloomberg) -- United Co. Rusal’s application for a $2 billion initial public offering on Hong Kong’s stock exchange received approval from the bourse and the securities regulator, allowing the world’s largest aluminum producer to become the first Russian company to list in the territory. The IPO was approved by Hong Kong’s exchange last week, two people familiar with the matter said. The Securities and Futures Commission said Rusal, controlled by billionaire Oleg Deripaska, will be excluded from offering stock to retail investors, according to two people, who declined to be identified because the approval hasn’t been announced. Rusal was earlier thwarted in its bid to go public before the end of 2009 as the Hong Kong bourse sought more information on the Moscow-based company’s debt. The aluminum producer plans to start gauging demand for the sale on Jan. 4, the people said. “It’s a bit of a first, so it’s very much a novelty,” said Julian Mayo, who helps oversee about $3 billion as investment director at Charlemagne Capital in London. “We’re looking at it because it is an important stock in an important industry in the country.” Still, “we need to wait until the financial numbers are published and then go through them,” Mayo said. “We would need to look at the overall capital structure post-deal.” No Protection Under an SFC proposal, wealthy individuals would be allowed to buy Rusal shares in the IPO with a minimum subscription of HK$1 million ($129,000), the people said. The Financial Times reported the figure earlier. Excluding individual investors from the IPO may end up increasing the risk they face, according to David Webb, a former director of the Hong Kong Stock Exchange. “Excluding retail investors from the IPO reduces protection, because under the Companies Ordnance, investors can only rely on a prospectus (in terms of right to sue) if they are subscribers in the initial public offering,” Webb said on his Web site yesterday. “The general public can buy the shares in the secondary market so excluding them from the primary offering does nothing to protect them.” The listing would come after IPOs in emerging markets outpaced those by companies in developed nations by the most since at least 2000 in the three-month period ended in November, according to data compiled by Bloomberg. No U.S. IPOs are scheduled this week, as the pace of offerings slows before the Christmas holiday, Bloomberg data show. Approval Withheld Rusal has said it plans to sell a 10 percent stake to help repay $17 billion of borrowings. The share offering will be led by Zurich-based Credit Suisse Group AG and BNP Paribas SA of Paris, with banks from BOC International Holdings Ltd. to VTB Group also helping to manage the sale. The exchange’s listing committee withheld approval for Rusal’s IPO application at a meeting on Nov. 26 and asked the company for more information, including details on its debt restructuring. Earlier this month, Rusal signed an accord with creditors in Russia’s largest corporate debt restructuring. A subsequent review by the exchange, on Dec. 7, again failed to approve Rusal’s bid. The bourse asked the company to explain how it would repay a $4.5 billion loan from Russian state-owned lender Vnesheconombank. The loan will be refinanced by OAO Sberbank, the Financial Times reported last week, citing unidentified people. Sberbank, VTB Rusal was rushing to secure approval in Hong Kong before the end of the year to avoid redrafting its 1,000-page IPO prospectus, which would delay the share sale until April, the FT also said, citing an unidentified Hong Kong exchange official. The company’s borrowings almost doubled last year after Rusal bought 25 percent of Moscow-based OAO GMK Norilsk Nickel, Russia’s biggest mining company, for $7 billion in cash and a 14 percent Rusal stake. Commodity prices subsequently collapsed, with aluminum tumbling 36 percent in 2008 on the London Metal Exchange. Rusal had a net loss of $6 billion last year, Vedomosti newspaper reported in October. The company was forced to take the $4.5 billion loan from Vnesheconombank in October 2008, the biggest state-led bailout of any Russian company. Russia’s two biggest banks, OAO Sberbank and VTB, both state-controlled, will buy shares in the IPO alongside state-run VEB, RIA Novosti reported this month, citing Russian President Dmitry Medvedev’s chief economic aide. CIC, Temasek The stakes Sberbank and VTB will buy won’t be significant enough to require approval from the lenders’ supervisory boards, Arkady Dvorkovich told reporters in Moscow, according to RIA. Rusal is also in talks with potential investors including China Investment Corp., the nation’s sovereign wealth fund, and Singapore’s Temasek Holdings Pte, the Hong Kong Economic Journal said in October. “I assume there’s got to be some enticement to Asian investors to participate,” said Gareth Morgan, an emerging markets money manager in London at F&C Asset Management, which oversees about $162 billion. “The quasi-state companies will get involved to some degree,” he said. “But I would imagine there will be a portion for global institutional investors.”