Prokhorov Ups RusAl Stake to 18.5%

Mikhail Prokhorov's Onexim Group has agreed to increase its stake in United Company RusAl to 18.5 percent as part of a restructuring of $2.8 billion owed by the aluminum giant, the companies said in a joint statement Sunday. The terms of the deal appeared to be extremely generous for RusAl, whose controlling shareholder Oleg Deripaska has been struggling to make payments on billions of dollars of debt incurred while adding holdings to his Basic Element conglomerate .Of RusAl's debt to Onexim, $2 billion will be converted into shares, while the remaining $800 million will be restructured, according to the statement, which was posted on RusAl's web site. "It values RusAl at $40 billion to $45 billion, which is extremely high," said Michael Kavanagh, metals and mining analyst at UralSib. He said RusAl was not worth 20 percent of that implied value. The sides seem to have agreed on using RusAl's value from April 2008, when Prokhorov sold a Norilsk Nickel stake to Deripaska for a combination of cash and 14 percent of RusAl, as well as an option to sell back the RusAl shares at a fixed price. It was not immediately clear, however, why Prokhorov would agree to such terms. Aluminum prices have fallen from about $3,000 per ton at the time of the deal to about $1,400 on the London Metals Exchange. As part of Sunday's deal, Prokhorov agreed not to use his put options on RusAl shares -- which Vedomosti has reported as being worth $7.3 billion -- for as long as a standstill agreement between RusAl and its creditors is active. Prokhorov has previously said he was not planning to use the option. RusAl had been considering using this general scenario to take care of some of its accrued debt. RusAl chairman Viktor Vekselberg said in January that the company might convert some of its debt to Prokhorov into shares, although he did not comment on the possible size of the conversion. The deal, together with the standstill agreement and RusAl's "program for increasing production efficiency," will "let the company successfully overcome the consequences of the world economic downturn," the statement said. Earlier this month, RusAl announced a standstill deal with more than 70 banks to delay repayment of $7.4 billion for two months with a possibility to extend the standstill for another month. President Dmitry Medvedev last week warned unnamed banks not to be too aggressive in trying to recover their debts, comments widely seen as directed at Mikhail Fridman's Alfa Bank, which is also a RusAl creditor. Basic Element units have accused Alfa of being uncooperative in the standstill talks. "Perhaps someone from the government told Prokhorov: 'This is how it's going to be,'" Kavanagh said. "There is obviously something more to the deal, because in the context of the market right now there are a lot more things he could do with the $2 billion than buying a 4.5 percent stake in RusAl." In April, Prokhorov sold his blocking stake of 25 percent in Norilsk, valued at the time at about $8.7 billion, to Deripaska, who took out $4.5 billion from a syndicate of foreign banks to clinch the deal. First Deputy Prime Minister Igor Shuvalov said Friday that the government had no intention of nationalizing RusAl, despite its heavy debts to state lenders. RusAl owes $4.5 billion to state development bank VEB, which in November helped RusAl repay the foreign banks and now holds the Norilsk stake as collateral. The loan is due this fall, and Shuvalov said he was against giving RusAl more time to repay, although he said he hoped that commercial banks or new shareholders would step in. Kavanagh said it was unlikely that private banks would take over the VEB loan, although state-run lenders such as Sberbank or VTB might open a credit line to RusAl. The deal announced Sunday will dilute the stakes of RusAl's shareholders proportionately, the statement said. EN+, the Basic Element unit that controls Deripaska's stake, will hold 53.8 percent, from about 57 percent. SUAL shareholders will own 18 percent, from 18.9, and Glencore's interest will fall to 9.7 percent, from 10.3 percent