Rusal in talks with lenders to delay their debt repayment

Rusal is presently in talks with their lenders to delay a repayment of part of its $10bn debt pile next month in the latest sign of distress in struggling industrial sector in Russia.

Russia’s metal sector is struggling under a slow economy’s burden as well as weak commodity market and imposition of sanction from west.

On Thursday, Anton Siluanov, the finance minister of Russia said the government was considering the creation of a special fund, supported by VEB, the state bankin order to support industry like it did in the year 2008-2009, although he warned the government would not bail out oligarchs of the country. “We should help companies, not owners,” he told a business forum.

Rusal has been negotiating with their creditors since last year to bring out a change in the terms of its debts, as the low aluminum prices had made them run into losses.

Next month it has to make repayments of $3.2bn. a part of their pre-export facility, $2.2bn is held by about 20 international lenders.

While Russia’s state banks and some international lenders have agreed to waive repayments on its debt until 2016, it has yet to receive approval from all its international creditors – necessary to avoid default ahead of a planned repayment in early April.

The China Development Bank was did not agree to their restructuring.

Rusal still hopes to receive unanimous approval in the next few weeks, but it has begun discussions to enter a “forbearance” agreement in case it is not received, a person close to the company told the Financial Times.

Rusal has “discussed a potential plan B”, the person said, under which banks would agree to postpone repayment for two to three months. Such an agreement would allow the company “to buy some time and reach agreement with those banks that are not credit approved yet”, the person said.

The company has so far received approval from just over 70 per cent of the international syndicate, he added.

Two other people familiar with the negotiations said an agreement to postpone repayments looked increasingly likely.

Rusal has gone under high debts since the company spent $14bn to purchase a stake in Norilsk Nickel in the year 2008 just before the price of metals tumbled in financial crisis. It underwent a big restructuring in the year 2009, but has remained leveraged; with $10.1bn in net debt till last September end. It lost $611m in the first 9 months of 2013.

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