Russia's Rusal Aims for $2.6 Billion IPO

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Rusal's valuation should lie between those commanded by Chalco, which is trading at 25 times next year's estimated earnings, and Western peers, analysts at Liberum Capital Ltd. wrote in a Dec. 22 note.

Rusal's debt almost doubled last year after buying a quarter of OAO GMK Norilsk Nickel before commodity prices collapsed. It reached agreements with creditors earlier this year to restructure $16.8 billion of obligations, cutting debt to $14.9 billion.

The company doesn't expect to pay dividends through 2013 because of restrictions imposed by those agreements, it said in the prospectus. Preconditions for dividends include making cumulative debt repayments of at least $5 billion and cutting the ratio of total net debt to "covenant" earnings before interest, tax, depreciation and amortization to below 3 times, from 47 times at the end of June, the document said.

Extended Deadline

The total debt repayment requirement excludes amounts paid to VEB and Onexim Group, a company controlled by Prokhorov, it said.

Rusal earlier agreed with international creditors to extend a repayment deadline for $7.4 billion of debt until December 2013. The international lenders have pledged to refinance its debt for another three years if Rusal meets conditions similar to those for dividend payments at the end of the initial four- year debt relief period, according to the prospectus.

Rusal's board expects VEB to extend the maturity of a $4.5 billion loan year-by-year to October 2013, it added. OAO Sberbank, Russia's largest lender, pledged to take over the VEB loan rights until December 2013 should VEB decide not to roll over the loan.

IPO Schedule

An accord between Rusal's major shareholders calls for it to pay at least 50 percent of its profit as dividends once it meets preconditions set by creditors, according to the document.

Banks arranging the IPO may reduce the number of shares or revise the range before Jan. 22. Rusal plans to price the offering on Jan. 22, and the stock is scheduled to start trading in Hong Kong on Jan. 27.

The stock will trade in "board lots," or blocks of shares, of 24,000 shares, or HK$200,000, at the listing date, Rusal said in the statement. Rusal has also applied to list its GDRs on the professional segment of Euronext Paris.

To contact the reporter on this story: Bei Hu in Hong Kong at bhu5@bloomberg.net

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